Metsä Board January-June 2017 Investor presentation · Investor presentation 1– 6/2017 2...
Transcript of Metsä Board January-June 2017 Investor presentation · Investor presentation 1– 6/2017 2...
Metsä BoardInvestor presentation 1–6/2017
3 August 2017
Investor presentation 1–6/20172
ContentsInvestment highlights 3
Strategy and financial targets 13
Operating environment and market position 21
Growth in the paperboard business 30
Husum investment programme and update 37
Result for January–June 2017 44
Balance sheet and financing 55
Production, capacities and sourcing 63
Product development focus areas 69
Sustainability 74
Shares and owners 80
Appendix 84
Contact information 92
Investment highlights
• Focus on premium fresh fibre paperboards• Market leader in folding boxboard and white fresh fibre
linerboard in Europe, global market leader in coated white fresh fibre linerboard
• Global sales to over 100 countries and eight production units in Finland and Sweden
• Strong fibre know-how and self-sufficiency in pulp • Sales in 2016 EUR 1.7 billion and comparable
operating result EUR 137 million• Appr. 2,500 employees in 23 countries
Investor presentation1–6/20174
Metsä Board in brief
50%25%
15%
10%
Sales split in 2016
Folding boxboardLinerboardsMarket pulpOthers
75 %
17 %
8 %
Sales split by region in 2016
EMEA
Americas
APAC
Solutions for wide variety of brand applications
In pack On shelf On display On the go In graphics
Packaging solutions for consumer goods
Retail ready tray solutions
Display and point-of-sale solutions
Solutions for food service
Solutions for graphical uses
Investor presentation1–6/20175
50% of Metsä Board’s folding boxboard sales are negotiated directly with brand owners
6
Metsä Board has a broad customer base
BRAND OWNERS
FOLDING BOXBOARD WHITE LINERBOARDS
MERCHANTS
CORRUGATED BOX MANUFACTURERS
CONVERTERS
Investor presentation1–6/2017
Lightweight• Up to 30% lighter than competing grades
(eg SBS, WLC) with at least the same stiffness
Purity and safety• Important in food and food service packaging,
eg recycled paperboard should not be in direct contact with food products
Sustainability• Wood raw material is 100% traceable to sustainably
managed northern forests
Quality• Excellent printability and runnability
7
Metsä Board’s paperboards havemany competitive advantages
Investor presentation1–6/2017
Metsä Board’s folding boxboards are produced from BCTMP or mechanical pulp, which is used in the middle layer (3) to make the board bulky and light.
The two outer fibre layers (2 and 4) are made of chemical pulp, which maximizes the strength of the board.
Coating layers (1) can be one or several and on top or both sides.
8
Metsä Board’s folding boxboard has a three-layer structure
Investor presentation1–6/2017
Strong profitability development2016 was negatively impacted by Husum’s new FBB machine ramp-up
Comparable ROCE-%
Investor presentation1–6/20179
Comparable EBIT-%
6,4
9,1
11,3
8,1
10,3
0
2
4
6
8
10
12
2013 2014 2015 2016 1-6/2017
%
5,2
6,8
9,08,0
9,7
0
2
4
6
8
10
2013 2014 2015 2016 1-6/2017%
Target over 12%
Investor presentation1–6/201710
Strong improvement in productivity over time
1 000
1 100
1 200
1 300
1 400
1 500
1 600
1 700
1 800
1 900
2 000
1 000
1 300
1 600
1 900
2 200
2 500
2 800
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E
Productivity (capacity) Personnel average
Production capacity (tonnes) / employee at current millsPersonnel
Capacity tn /employee
• High investment costs
• Limited availability of high yield pulp (e.g. BCTMP)
• Global brand owners and corrugated box manufacturers not willing to change paperboard suppliers easily in the high-quality segments
– High speed packaging lines very quality sensitive– Requirements for unified brand look and feel globally– Sustainability and product safety aspects
• Skilled people and organizations a crucial success factor
Investor presentation1–6/201711
High threshold for new producers to enter high-quality paperboard segment
• Investments in H1 2017 were EUR 31 million (H1/16: EUR 103 million)
• Estimated capex in FY 2017 is EUR 65–70 million
Clearly lower capex in 2017
0
30
60
90
120
150
180
2010 2011 2012 2013 2014 2015 2016 2017E
Maintenance capex Growth capex Depreciation
EUR million
12 Investor presentation1–6/2017
Main growth in capex in 2015−2016: Husum investment programme, extrusion coating line and equity investment in Metsä Fibre’s bioproduct mill
Strategy and financialtargets
Values
• Responsible profitability• Reliability• Cooperation• Renewal
Strategic cornerstones
• Focus• Growth• Profitability
Investor presentation1–6/201714
Metsä Board’s vision is to be the preferred supplier of premium paperboards creating value for customers globally
Focus on premium fresh fibre paperboards for consumer and retail packaging
This means to us:• We focus on serving customers whose quality
expectations require our high quality, light and strong packaging materials
• Our paperboards are produced from fresh fibres• Our products are used for packages at the store and
from the store to the consumer
Investor presentation1–6/201715
Strategic cornerstones: Focus
Profitability is based on superior cost efficiency and healthy sales prices driven by high-quality pulps and unique technical know-how
This means to us:• Our superior cost efficiency will be achieved by further
developing productivity and efficiency of our mills, operations and people
• We will continue to drive down purchasing costs in all areas
• Our self-sufficiency in high-quality pulps together with unique paperboard making expertise helps us to improve our market position further and maintain healthy price levels
Investor presentation1–6/201716
Strategic cornerstones: Profitability
Grow profitably together with brand owner, converter and merchant customers globally in businesses that benefit from our safe and sustainable paperboards
This means to us:• We grow in end-uses where our product is best suited to
protecting our customers’ products and promoting their brands and businesses
• Our customer base is global, including brand owner, private label, converter and merchant customers
• By selecting businesses that benefit from our paperboards we can generate value for our customers and grow profitably with them
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Strategic cornerstones: Growth
Financial targetsEfficient use of capital and higher profitability through focused growth
Comparable ROCE, %
4,86,4
9,1
11,3
8,1
2012 2013 2014 2015 2016
3,42,9
1,81,2
2,0
2012 2013 2014 2015 2016
Net IB debt / Comparable EBITDA, %
4%
7%
10%
13%12%
2012 2013 2014 2015 2016
Annual growth in total paperboard deliveries, %
Target is to exceedrelevant market growth*
Dividend policy: Metsä Board aims to distribute at least 50% of its result for thefinancial period in annual dividends to its shareholders
Target: > 12%
Target: < 2.5x
18
* Global fresh fibre paperboard demand growth 3-4%/a
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• Grow the paperboard businesses profitably globally
• Ensure successful sales of new capacity
• Secure good price levels
• Keep best in class product quality and improve supply
chain
• Develop new products for existing and new end uses
• Continue productivity improvements and cost savings
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Main priorities and actions to achieve financial targets
• Metsä Board’s dividend payout target is at least 50 per cent of the result for the financial period
• Dividend for 2016:– EUR 0.19 per share– Totalling EUR 68 million– Corresponds to 76 per cent of EPS 0,00
0,10
0,20
0,30
0,40
0,50
2012 2013 2014 2015 2016
EPS and DPS, EUR
Earnings per share Dividend per share
Investor presentation1–6/201720
Dividend and EPS
Operating environment andmarket position
Global trends driving growth in packaging
• Growing consumption
• Stronger demand for sustainable
packaging
• Greater significance of resource
efficiency drives circular economy and
life-cycle thinking
• Increasing regulation brings additional
obligations
• Social responsibility throughout the
value chain
2017 CMD Joukio 15
The global paperboard packaging market is about USD 260 billion
The total packaging market is USD 840 billion
Investor presentation1–6/201723
Average annual growth rate of paperboard packaging
Paperboard packaging
Other wood fibre based packaging
Non-fibre based packaging
0
50
100
150
200
250
300
350
USD 260 bn
USD bn
Source: Smithers Pira
+ 3% p.a.
Roughly halfis made of fresh fibres
24
Global cartonboard* market is 36 Mt/a of which folding boxboard market is about 9 Mt/a
Source: Metsä Board estimates
*Excluding liquid packaging board, cup & plate stock, liner and uncoated recycled board.
APAC20 Mt/a
EMEA8 Mt/a
NorthAmerica
6 Mt/a
Lat.Am.2 Mt/a
Folding boxboard
Other fresh fibre grades (e.g. SBS, CUK)
Recycled grades
Avg. growth rate for folding boxboard is
3–4%/a
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25
Global food service board* market is 3.5 Mt/a
* Base board (e.g. SBB or FBB) only, excl. other laminate materials such as aluminium and PE.
Cups
Plates
Cartons
APAC1.0 Mt/a
EMEA0.9 Mt/a
Americas1.6 Mt/a
Avg. growth rate for food service board is
3–5%/a
Source: Metsä Board estimatesInvestor presentation1–6/2017
26Source: Metsä Board estimates
Investor presentation1–6/2017
Americas3 Mt/a
Global white linerboard market is 10.5 Mt/aGlobal white coated kraftliner market is 1 Mt/a
Global containerboard market is 155 Mt/a, of which
• White linerboards 7%• Brown kraftliner 17%
• Brown testliner 37%
• Fluting 39%
Americas3 Mt/a
EMEA4,5 Mt /a
APAC3 Mt/a
White uncoated kraftliner
White coated kraftliner
White recycled liner
Metsä Board has a strong position in Europe
Largest Folding Boxboard Producers in EuropeTotal capacity: 3.7M tonnes
Largest White Fresh Fibre Linerboard Producers in EuropeTotal capacity: 2.2M tonnes
Sources: Company information, Pöyry Management Consulting Oy Q2/2017
17%
7%
9%
11%
20%
36%
0 300 600 900 1200 1500
Others
International Paper
Mayr-Melnhof
Kotkamills Oy
Stora Enso
Metsä Board
15%
7%
10%
14%
22%
31%
0 200 400 600 800
Others
SCA
BillerudKorsnäs
Mondi
Smurfit Kappa
Metsä Board
27 Investor presentation1–6/2017
500
600
700
800
900
1000
1100
1200
2009 2010 2011 2012 2013 2014 2015 2016 2017
Folding boxboard White-top kraftliner
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Market price development in folding boxboard and white-top kraftliner in Europe
EUR/ tn
Sources: RISI, Inc. & FOEX Indexes Ltd
Source: Foex Indexes Ltd
Softwood, USD
Softwood, EUR
Hardwood, EUR
Hardwood, USD
USDEUR
Pulp price development (PIX)
29
350400450
500550600650
700750800850900
95010001050
'10 '11 '12 '13 '14 '15 '16 '17350400450
500550600650
700750800850900
95010001050
Investor presentation1–6/2017
Growth in the paperboardbusiness
Investor presentation1–6/201731
Globally growing paperboard market
PAPERBOARD 5-YEAR GROWTH FORECAST EMEA Americas APAC
Folding boxboard (FBB)
Food service board (FSB)
Coated white kraftliner n/a
Uncoated white kraftliner n/a
Other fresh fibre paperboards (eg SBS, CUK)
Recycled paperboards (eg WLC)
+2%/a or more
+1 to +2%/a
-1 to +1%/a
-1 to -2%/a
-2%/a or more
Source: Metsä Board‘s own estimate
Metsä Board’s growth exceeds clearly the average market growth
32
0
250
500
750
1 000
1 250
1 500
1 750
2 000
2012 2013 2014 2015 2016 2018 target
Fresh fibre linerboard Folding boxboard
Metsä Board’s annual paperboard deliveries, 1,000 tonnes
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Investor presentation1–6/201733
Most important growth area is Americas
0
50
100
150
200
250
300
2011 2012 2013 2014 2015 2016 2018 target
Folding boxboard Fresh fibre linerboard
300
250
1,00
0 to
nnes
Actual and targeted deliveries to Americas
34
Metsä Board's regional goals
GROWTH IN THE AMERICAS IN THE COMING YEARS
MAINTAINTHE STRONG MARKET POSITION IN EUROPE
FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION
AMERICASSHARE OF SALES IN 2016
17%
EMEASHARE OF SALES IN 2016
75%
APACSHARE OF SALES IN 2016
8%
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35
GROWTH IN THE AMERICAS IN THE COMING YEARS
MAINTAINTHE STRONG MARKET POSITION IN EUROPE
FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION
AMERICASSHARE OF SALES IN 2016
17%
EMEASHARE OF SALES IN 2016
75%
APACSHARE OF SALES IN 2016
8 %
EUROPE• A leading market position with
strong, long-lasting customerrelationships – especially withbrand owners
• Safety is increasing significancein food packaging
• Paperboard is a strong alternative to plastics andaluminium
• Growing e-commerceincreasing demand for high-end white-top kraftliners
Investor presentation1–6/2017
Metsä Board's growth drivers in Europe
36
GROWTH IN THE AMERICAS IN THE COMING YEARS
MAINTAINTHE STRONG MARKET POSITION IN EUROPE
FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION
AMERICASSHARE OF SALES IN 2016
17%
EMEASHARE OF SALES IN 2016
75 %
APACSHARE OF SALES IN 2016
8 %
AMERICAS• Local production not able to meet rising trend of
lightweighting• Non-integrated converters looking for alternative
board suppliers• Paperboard a strong alternative to plastics –
especially in food service applications• Growing e-commerce increasing demand for
high-end white-top kraftliners
Investor presentation1–6/2017
Metsä Board's growth drivers in Americas
Husum investmentprogramme and update
Investor presentation1–6/201738
• Launched at the end of 2014• Two paper machines closed in 2015 • One paper machine converted to produce linerboard (BM2)• New folding boxboard machine (BM1) started up in February
2016• Enhancements to the pulp mill and the mill site’s own port• New extrusion coating line started up in April 2017
Folding boxboard production
• Capacity approximately 400,000 t/a
• Deliveries mainly to Americas and food service globally
Linerboard production
• Capacity approximately 270,000 t/a
• Deliveries to Europe and Americas
Husum investment programme
• EUR 38 million investment, capacity of 100,000 t/a• Targeted at food packaging and food service applications• PE-coated* paperboard is an alternative to plastics and the
mainstream barrier solution today • PE fulfills important barrier requirements:
– Good water and moisture barrier
– Grease barrier (short time e.g. for food service)
– Good heat sealing properties
• Husum PE coating line utilises latest technology and benefits from a fully integrated production site
• Supports growth in a new customer segment
Investment in PE coating
Investor presentation1–6/201739
Raw materialLogistics
Raw materialExtrusion
Raw materialPaperboard
Raw materialPulp
40
The integrated mill model improves efficiency and sustainability of the supply chain
• Certified wood resources
• Own deep water port
• Own pulp mill at the mill site
• Paperboard production (BM1)
• Extrusion coating line (EM1)
Raw materialRaw materialHusum integrated mill:
Investor presentation1–6/2017
Investor presentation1–6/201741
Targeted sales and sales split for new paperboard volume from Husum mill
250150
150
0
500
1 000
1 500
2 000
Deliveries in 2015 Folding boxboard toAmericas
Food service boardglobally
Linerboard toEurope andAmericas
Targeted deliveriesin 2018
A total of 400,000 tonnesof new FBB capacity
1,00
0 to
nnes
Incremental capacity in linerboard*)
*) Until July 2016 the paperboard machine (BM2) produced simultaneously fine paper reels.
• Capacity utilisation rate in FBB during H1 2017 was 70%– In June, both production and deliveries were over 85% of
monthly capacity– The target of having the capacity in full use by end of 2018
is intact
• Production costs per tonne produced still highercompared to Finnish mills
• Geographical sales mix burdened the average price in FBB
• Deliveries of own PE-coated paperboards to customershave started
Investor presentation1–6/201742
Husum folding boxboardupdate post H1/2017
43
Potential to improve profitability of HusumAt least EUR 100 million EBIT improvement from 2016 to 2019
2016 2019
+ EUR
25 million+ EUR
5 million+ EUR
>70 million
120,000 tonnesof pulp
productionlost in 2016
Restructuring:
Efficiency improvementprogramme
FBB capacityutilisation rate
>95% withnormal sales
price
Investor presentation1–6/2017
Result for January−June 2017
• Good demand for high-quality paperboardscontinued
• Stable or rising market price levels• Metsä Board’s paperboard deliveries up by
11% from Q1 2017• The average price of folding boxboard was
burdened by Husum’s geographic sales mix• Steady working capital despite the strong sales
growth• New extrusion coating line in Husum started up
Investor presentation1–6/201745
Q2 2017 in summary
Investor presentation1–6/201746
Key financialsQ2/17 Q1/17
ChangeQ2/17
vs. Q1/17H1/17 H1/16
ChangeH1/17
vs. H1/162016
Sales EUR, m 474 445 +7% 919 859 +7% 1,720
EBITDA* EUR, m 68 69 -1% 136 119 +14% 231
Operating result* EUR, m 44 45 -2% 89 71 +25% 138
% of sales % 9.2 10.2 9.7 8.2 8.0
Result before taxes* EUR, m 37 40 -8% 77 57 +35% 107
Earnings per share EUR 0.09 0.10 -10% 0.19 0.13 +46% 0.25
ROCE* % 10.3 10.6 10.3 8.4 8.1
Capex EUR, m 12 19 -37% 31 103 -70% 162
Cash flow from operations EUR, m 37 26 +42% 63 -45 77
IB Net debt, at end of period EUR, m 495 458 +8% 495 541 -9% 464*comparable
All-time high in paperboard deliveries
204 213 224 224 227 250 266 245 265 304
130 141 137 131 142148 148
143163
173
0
100
200
300
400
500
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
Folding boxboard White fresh fibre linerboard
1,00
0 to
nnes
Growth in total paperboarddeliveries:
+11% Q2/17 vs. Q1/17
+18% H1/17 vs. H1/16
+12% FY16 vs. FY15
47 Investor presentation1–6/2017
FY 2015:1.4m tonnes
FY 2016:1.6m tonnes
Sales and operating result
SalesEUR million
436 423 440 422 445 4740
100
200
300
400
500
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
+7%
35 36 34 33 45 44
8,0 % 8,5 %7,7 % 7,8 %
10,2 %9,2 %
0%
2%
4%
6%
8%
10%
12%
0
10
20
30
40
50
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
+25%
Investor presentation1–6/201748
Comparable operating resultEUR million and %
H1 2016:EUR 859 million
EU
R m
illio
n
EU
R m
illio
n
H1 2017:EUR 919 million
H1 2016:EUR 71 million
H1 2017:EUR 89 million
45 44
01020304050
Q1 2017 Q2 2017
Comparable operating result, EUR millionQ2 2017 vs. Q1 2017
Investor presentation1–6/201749
Impacts on operating resultQ2 2017 vs. Q1 2017 and H1 2017 vs. H1 2016
7189
0102030405060708090
H1 2016 H1 2017
Comparable operating result, EUR millionH1 2017 vs. H1 2016
+ Growing delivery volumes in paperboardand positive development in market pulp
- Geographic sales mix of Husum’s FBB and product mix of Husum’s white linerboards, maintenance at Finnish mills
+ Positive development at Finnish paperboardmills and in market pulp, positive impact fromFX rates including hedges
- Increased latex price
EBIT-%8.2
EBIT-%9.7EBIT-%
10.2
EBIT-%9.2
WTKL = white-top kraftlinerFBB = folding boxboard
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
Comparable ROCE, %Investor presentation1–6/201750
Return on capital employed, %
Target >12%
Q2/17:10.3%
Cash flows clearly positiveWorking capital remained nearly unchanged despite the strong growth in Q2
3356
9366
-22 -22
67 55 26379 8 45 8
-76-50
49 17 7 25
250214
256 247
193
11589 78
126
185188
119 118
70
-15
-73
-69
-60
2398
-100
-50
0
50
100
150
200
250
300
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
Cash flow from operations, quarterly Free cash flow, quarterlyCash flow from operations, rolling 12 months Free cash flow, rolling 12 months
EUR
milli
on
51 Investor presentation1–6/2017
Stable balance sheet
333 464 541 488 464 458 495
1,2
2,0 2,1 2,1 2,0 1,9 2,0
0,0
1,0
2,0
3,0
0
200
400
600
2015 2016 6/16 9/16 12/16 3/17 6/17
Interest-bearing net debt, EUR millionInterest-bearing net debt / EBITDA (rolling 12-month)
Interest-bearing net debt / comparable EBITDA
333 464 541 488 464 458 495
32%
44%
54%49%
44% 44% 45%
0
0,1
0,2
0,3
0,4
0,5
0,6
0
200
400
600
2015 2016 6/16 9/16 12/16 3/17 6/17
Interest-bearing net debt, EUR millionNet gearing, %
Net gearing, %
52 Investor presentation1–6/2017
Financial target: <2.5x
Investor presentation1–6/201753
Near-term outlook
• Price levels in FBB are expected to be stable, several linerboard producers have announced price increases. Pulp market expected to remain in balance
• Metsä Board’s Q3 paperboard delivery volumes are expected to stay flat compared to Q2
• Focus on improving the geographic sales mix in Husum’s folding boxboard and increase the share of North American sales, in particular
• Start-up phase of Metsä Fibre’s new bioproduct mill in August is expected to have only a minor negative impact on Metsä Board’s result
Metsä Board's comparable operating result for the third quarter of 2017 is expected to improve slightly compared to the second quarter of 2017.
Investor presentation1–6/201754
Profit guidance
Balance sheet and financing
Investor presentation1–6/201756
Strong balance sheet
Equity ratio, %
41% 39%
46% 48% 51%
0%
10%
20%
30%
40%
50%
2013 2014 2015 2016 6/2017
70%
51%
32%
44% 45%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2013 2014 2015 2016 6/2017
Net gearing, %
597 427 333 464 495
2,9
1,8
1,2
2,0
2,0
0
1
2
3
4
0
200
400
600
2013 2014 2015 2016 6/2017
Net debt, EUR million
Net debt/EBITDA (rolling 12 months)
Net debt, EUR million and Net debt / Comparable EBITDA
Debt structure and liquidity30 June 2017
223
149111
23
134
Bonds
Loans fromfinancial institutions
Pension loans
Finance leases andother loans
Other short-termloans
141
100
102
Cash and cashequivalentsRevolving creditfacilityUnraised pensionloans
Interest-bearing debt, total EUR 640 million
Available liquidity, total EUR 343 million
Average maturity of long-term loans on 30 June 2017 was 2.0 years. 57 Investor presentation
1–6/2017
Investor presentation1–6/201758
Maturity schedule in long-term IB debt
82
42
258
174
1 2
100 102
0
50
100
150
200
250
300
2017 2018 2019 2020 2021 >2021
Long-term interest-bearing debt (total EUR 558 million) and committed undrawn credit facilities 30 June 2017
Long-term interest bearing liabilities Committed undrawn credit facilities
EUR million
Investor presentation1–6/201759
Debt programmes 30 June 2017Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity
EUR 225 million bond Issue 2014 225 225 4.5 2019
Syndicated credit facility 2014 250 150 3.2 2020
EUR 51 million bilateral loans 51 51 1.4 2017–2020
EUR 23 million finance leases 23 23 2.3 2017–2024
EUR 213 million pension loans 213 111 4.6 2017–2020
Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity
Revolving credit facility 2014 100 0 - 2020
Pension loan facilities 213 111 4.6 -
Short-term funding programmes
Metsä Group internal short-term limit 150 0 - 0–12 months
Metsä Group Treasury funding programmes
EUR 150 million domestic CP programme 150 0 - 0–12 months
Metsä Board’s significant debt securities issued and outstanding at 30 June 2017
*) The average interest rate take into account outstanding interest rate swaps and amortised arrangement fees.The average interest rate of all Metsä Board interest bearing net liabilities incl. interest rate derivatives per 30 June 2017 is 3.3%.
Metsä Board’s principal long-term liquidity reserves at 30 June 2017
Investor presentation1–6/201760
Steadily decreasing net financial costs
56 39 32 31 12
4,6
4,2
3,8
3,3 3,3
3,0
3,5
4,0
4,5
5,0
0
10
20
30
40
50
60
2013 2014 2015 2016 H1/2017
Net financial costs, EUR millionAverage interest rate at the end of period, %
EUR million %• Net financials in H1 2017
were EUR -12 million(H1/16: EUR -14 million)
• Net exchange gains and losses in H1 amounted to EUR -0.6 million (EUR -0.3 million)
Impact of FX rate changes including hedges– Q2 2017 vs. Q1 2017: EUR -1.5 million– H1 2017 vs. H1 2016: EUR 11 million
FX exposure and sensitivities
58 %35 %
5 %2 %USD
SEK
GBP
Othercurrencies
Annual transaction exposureEUR 1.1 billion
FX sensitivities excluding hedges
10% strengthening of foreign currency vs. EUR will have an impact on Metsä Board’s EBIT of
Currency Next 12 months
USD, $ EUR +70 million
SEK EUR -40 million
GBP, £ EUR +7 million
61 Investor presentation1–6/2017 Hedging policy: 100% of balance sheet position and 50% of annual net FX flows
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
62
Metsä Board 's credit rating
Moody’sStandard & Poor’s
BB+ | Ba1
Stable
Positive
BB | Ba2
BB- | Ba3
B+ | B1
B | B2
B- | B3
CCC+ | Caa1
CCC | Caa2
Investor presentation1–6/2017
Production, capacities and sourcing
Investor presentation1–6/201764
Metsä Board’s production units
Äänekoski
Simpele
Joutseno
Tako
Kyro
KaskinenHusum
KemiIntegrated mills• Husum, Sweden
400,000 t/a folding boxboard270,000 t/a white linerboard730,000 t/a chemical pulp
• Kemi410,000 t/a white linerboard620,000 t/a chemical pulp by Metsä Fibre
• Äänekoski240,000 t/a folding boxboard530,000 t/a chemical pulp by Metsä Fibre
• Joutseno320,000 t/a BCTMP690,000 t/a chemical pulp by Metsä Fibre
Non-integrated mills• Kyro (Kyröskoski)
190,000 t/a folding boxboard
• Simpele280,000 t/a folding boxboard
• Tako (Tampere)210,000 t/a folding boxboard
• Kaskinen340,000 t/a BCTMP
Taking into account Metsä Group‘s pulpproduction, Metsä Board‘s pulp balanceis 400,000 t/a long
Investor presentation1–6/201765
Paperboard capacity
Town Country Machines Folding boxboard
White freshfibre linerboard Total
Tampere (Tako) Finland 2 210 210
Kyröskoski (Kyro) Finland 1 190 190
Äänekoski Finland 1 240 240
Simpele Finland 1 280 280
Kemi Finland 1 410 410
Husum Sweden 2 400 270 670
Total 8 1,320 680 2,000
Investor presentation1–6/201766
Pulp capacityMetsä Board pulp mills Country Chemical pulp BCTMP Total
Husum Sweden 730 730
Joutseno Finland 320 320
Kaskinen Finland 340 340
Total 730 660 1,390
Metsä Fibre pulp mills Country Chemical pulp BCTMP Total
Äänekoski Finland 530 530
Kemi Finland 610 610
Rauma Finland 650 650
Joutseno Finland 690 690
Total 2,480 2,480
Deliveries by region in 2016
Folding boxboard
Investor presentation1–6/201767
Fresh fibre linerboard
48%
25%
16%
11%
Western Europe
Eastern Europe
Americas
Asia and Pacific
60%7%
32%
1%
Own generation
20%
Through PVO shareholding
32%
Purchased energy
45%
Outsourced generation
3%
Wood-based60%
Nuclear power22%
Gas7%
Hydro4%
Coal2%
Peat2% Oil
2%
Sweden 38%
Finland31%
Baltic countries18 %
Russia13%
Sourcing 2016Electricity sourcing
(total 2,438 GWh)
Investor presentation1–6/201768
Primary energy used(total 12.0 TWh)
Wood sourcing by country (total 4.6 million cubic metres)
Product development focus areas
Key product development focus areas
Improved BCTMP
Microfibrillated cellulose (MFC)
Strength additives
Sustainable lightweighting
Dispersion barriers
Bio-based raw materials
Barrier boardPE extrusion coated products
Investor presentation1–6/201770
Lighter-weight paperboards: Better with Less
Metsä Boardlightweight paperboard
Average FBB –Folding boxboard
SBB –Solid bleached board
WLC –White lined chipboard
Investor presentation1–6/201771
Metsä Board Barrier boards roadmap
Bio
base
dba
rrie
rN
onbi
o-ba
sed
barr
ier
Outsourced PE extrusion coating
Own PE extrusion coating
Bio based barrierBio based light barrier
2016 2017Investor presentation1–6/201772
73
Barrier boards types
NO
N-R
ENEW
AB
LE
BIODEGRADABLE
REN
EWA
BLE
NON-BIODEGRADABLE
Metsä Board’s baseboard is bio based, bio-degradable and compostable.
Bio based, bio-degradable coating, i.e. starch, PLA etc.
Oil based, bio-degradable coating
Bioplastic coating, i.e. green PE
Latex based dispersion coatingPE extrusion coating
Investor presentation1–6/2017
Sustainability
Pure paperboard helps to store the packaged product
safely.
The circular economy of a durable and safe package
Durable paperboard protects the packaged product
effectively.
Our paperboards are recyclable and biodegradable, or they can be used for energy production.
We follow goodmanufacturing principles(GMP).
All of our products meet the requirements of relevant international legislation.
Fresh fibre is a pure and safe, renewable
raw material. We only use carefully selected and safe raw materials in our products.
75 Investor presentation1–6/2017
Rain waters the forest
Bark is utilised as a bio-energy source
Metsä Board’s boardproduction is mostly integrated in pulp production
Waste waters are always carefully cleanedbefore returned back to the waterways
Also lakes and seas are a source of recreation
Light weight boards are resource efficient both for us as well as for our customers
99% of water used in the productionprocess is returned back to the waterways
Metsä Board’s paperboards can be recycled, depending upon local recycling services
Forests are a source of recreation
Metsä Board uses water efficiently
Metsä Board has decreased its CO2 emissions by 45% since 2009 and the use of water by 14% since 2010
Metsä Board only uses surface waterin its production
LOGISTICSENSURE THE SUSTAINAINABILITY OF MAIN LOGISTIC FLOWS
PERFORMANCE 2016−2017 100%
SAFETY AT WORKLOST-TIME ACCIDENTS FREQUENCY ANNUALLY
PERFORMANCE 2016 -18.9%
-10%ENERGYENERGY EFFICIENCY IMPROVEMENT2009−2020
PERFORMANCE 2016 7.8%
12% -17%RESOURCE EFFICIENCYPROCESS WATER USE PERPRODUCT TONNE 2010−2020
PERFORMANCE 2016 -14%
Metsä Board’s sustainability targets
>80%
WOODTHE SHARE OFCERTIFIED WOOD
PERFORMANCE 2016 81%
-30%
CLIMATEFOSSIL CO2 EMISSIONS PER PRODUCT TONNE 2009−2020
PERFORMANCE 2016 -45%
<3%WELL-BEINGSICKNESS ABSENTEEISM
PERFORMANCE 2016 4.1%
BIOENERGY SHARE OF TOTAL PURCHASED ENERGY 51%
Investor presentation1–6/201777
• CDP Water A List– For the second year in a row Metsä Board was globally the
only forest company chosen to the A List
• CDP Climate A List– Only 9% of the companies were chosen on the list
• CDP Forest programme– Leadership status
• CDP Supply chain programme– Metsä Board participates together with its customers– L’Oréal nominated Metsä Board to its best performer as
packaging material supplier in 2015
78
Metsä Board scored again highin CDP in 2016
Investor presentation1–6/2017
EU Commission– In December 2016, announced plans to regulate printed food contact
materials (FCMs) on EU level
Food Contact Material legislation in Switzerland– Part of Swiss Food law
– Recycled paper cannot be used as FCM, if direct contact with food products (exceptions for example eggs)
– No regulation of mineral oil but concentration limits of certain polyaromatichydrocarbons micrograms/kg food has been set
Draft German mineral oil regulation– 4th ordinance draft was published in March 2017
– The draft focuses on mineral oil migration from recycled fibre basedpackaging materials to food
– EU notification is expected to start during autumn 2017
79
Increased regulation to ensureproduct safety
Investor presentation1–6/2017
Shares and owners
Market cap and foreign owners30 June 2017
Ownership distribution30 June 2017
Market cap and ownership distributionMetsä Board shares (METSB, METSA) are listed on Nasdaq Helsinki
0
4
8
12
16
20
24
0
500
1 000
1 500
2 000
2 500
2012 2013 2014 2015 2016 1-6/2017
Market cap, EUR million
Share of foreign owners, %
42 %
22 %
18 %
18 % MetsäliittoCooperative
Domestic institutionalinvestors
Domestic privateinvestors
Foreign owners
EUR million
* Metsäliitto Cooperative has 61% of voting rights
*
81
%
Investor presentation1–6/2017
Investor presentation1–6/201782
Ownership structure on 30 June 2017
42 %
18 %
18 %
13 %
4 % 2 % 3 %
MetsäliittoCooperative
Foreign owners*
Households
Public sectororganisations
Finance andinsurancecompaniesNon-profitorganisations
Other companies
61 %15 %
11 %
7 %
4 %
1 %1 %
MetsäliittoCooperative
Public sectororganisations
Households
Foreign owners*
Non-profitorganisations
Finance andinsurance companies
Other companies
Shares, % (total no. of shares 355,512,746)
Votes, % (total no. of votes 1,037,530,115)
* incl. nominee registered
Metsä Board has two series of shares: 35,886,682 A-shares and 319,626,064 B-shares.A-share entitles to 20 votes and B-share entitle to 1 vote at a General Meeting.
Transformation has increased shareholder value
Enterprise value, EUR million
0
500
1000
1500
2000
2500
3000
2008 2009 2010 2011 2012 2013 2014 2015 2016
Net debt Market capitalization
Dividend and payout ratio %
0 %
15 %
30 %
45 %
60 %
75 %
90 %
0,00
0,04
0,08
0,12
0,16
0,20
2012 2013 2014 2015 2016
Dividend, EUR Dividend/EPS, %
83 Investor presentation1–6/2017
EUR mill. EUR
Appendix
85
Corporate Management Team
Mika JoukioCEO
Chairman of CMT since 2014Share ownership 261,884
Ari KivirantaSVP, Development
Member of CMT since 2014Share ownership: 16,236
Jussi NoponenCFO
Member of CMT since 2016Share ownership: 50,000
Sari PajariSVP, Marketing and Sales
Member of CMT since 2011Share ownership: 45,740
Susanna TainioSVP, HR
Member of CMT since 2015Share ownership 20,505
Investor presentation1–6/2017
Share ownerships are B-shares
Harri Pihlajaniemi was appointed SVP, Production, and a member of the Corporate Management Team on 6 June 2017. He will start by 6 September 2017 at the latest.
METSÄ TISSUE
Tissue and cookingpapers
Sales:
EUR 1.0 billionPersonnel:
2,700Metsäliitto Cooperativeholding 100%
METSÄ WOOD
Wood Products
Sales:
EUR 0.5 billionPersonnel:
1,520Metsäliitto Cooperativeholding 100%
METSÄ FOREST
Wood Supply and ForestServices
Sales:
EUR 1.5 billionPersonnel:
860Metsäliitto Cooperativeholding 100%
Investor presentation1–6/201786
METSÄ BOARD
Paperboard
Sales:
EUR 1.7 billionPersonnel:
2,500Metsäliitto Cooperativeholding 42%, 61% of votes
METSÄ FIBRE
Pulp and SawnTimber
Sales:
EUR 1.6 billionPersonnel:
1,230Metsäliitto Cooperativeholding 50.2%, Metsä Board 24.9%,Itochu Corporation 24.9%
METSÄ GROUP | Sales EUR 4.7 billion | Personnel 9,300
METSÄLIITTO COOPERATIVE | Group’s parent company | Owned by 104,000 Finnish forest owners
INVESTMENT, EUR
1.2 billion
ELECTRICITY, Wh/a
1.8 tera
WOOD USAGE, m3/a
6.5 million
ELECTRICITY SELF SUFFICIENCY
240 percent
CERTIFIED WOOD
90 percent
START UP
August 2017
METSÄ BOARD INVESTED EUR 24.9 MILLION IN EQUITY → COMPANY’S PULP BALANCE WILL GROW BY 200,000 TONNES/A.
CAPACITY, tonnes/a
1.3 million
Metsä Board’s associated company Metsä Fibre builds a Bioproduct Mill
87 Investor presentation1–6/2017
‒ From 26 to 8 production units‒ Paper capacity from 5 million tonnes to zero‒ Paperboard capacity from 1.1 million tonnes to 2.0 million tonnes‒ Major divestments incl. Graphic Papers and Map Merchants‒ Paperboard (incl. market pulp) 100% of sales from 2017 onwards‒ Major improvement in profitability and financial position
Today strong position and growing‒ #1 producer of folding boxboard in Europe‒ #1 producer of coated white-top kraftliner globally‒ Husum investment programme enabling significant growth steps
88
Restructuring to a pure-play paperboardcompany from 2005 onwards
Investor presentation1–6/2017
Investor presentation1–6/201789
M&A activity 1997-2015
100 000 B2 shares in
PVO
Acquisitions
Divestments
Biberist Paper Mill
UK Paper
Modo Paper
Zanders
ChemicalsBusiness
BotniaWood
CorrugatedPackaging
MD Papier Metsä Tissue
Albbruck SavonSellu
Forestia
KemiartLiners (53 %)
8% in Botnia
PSM
9% in Botnia
Cartonplants
Map
New Thames
MB Uruguay
Graphic Papers
Part of Reflex
Halleinmill
1997 20001998 1999 2001 2002 2003 2004 2005 2006 2007 20092008 2010 2011
Rest of Reflex
0.5% in PVO
2012
7.3 % in Metsä Fibre
2013 2014
Alizay mill Lielahti
real estate
2015
Gohrsmühle mill
Simpele Mill
Year Divestiture Enterprise Value, EUR million
2015 Gohrsmühle mill in Germany neg.
2014 Lielahti real-estate 32
2013 Alizay property and other estates 22
2012 7.3% stake in Metsä Fibre 138
2012 0.5% stake in PVO 64
2011 Hallein 34
2009 Metsä-Botnia’s Uruguayan operations 300*
2008 Graphic Papers 750
2008 100,000 shares in PVO 80
2008 New Thames mill 82**
2007 Map Merchant Group 382
2007 Folding carton plants 60
2007 Botnia (9%) 240
2005 Botnia (8%) 164
2005 Savon Sellu 20
2005 Forestia (95%) 163
2004 Metsä Tissue 570
2002 Papierfabrik Albbruck 235
2001 MD Papier 300
2001 Noviant (19%) 41
3,679
Investor presentation1–6/201790
Significant Divestments EUR 3.7 billion in assets divested since 2001
* Cash portion**Incl. pension liabilities
Investor presentation1–6/201791
5624 4440 3236 2432 2605 2485 2108 2019 2008 2008 1720
0,8 1,1
‐1,1‐6,2
6,6
2,43,6
5,2
6,8
9,0
8,0
‐7,0
‐5,0
‐3,0
‐1,0
1,0
3,0
5,0
7,0
9,0
0
1000
2000
3000
4000
5000
6000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales, EUR million Comparable EBIT‐%
%
Sales and EBIT-% development
Katri SundströmVice President, Investor relations
Tel +358 400 976 [email protected]
92
Contact information
Investor presentation1–6/2017