Metsä Group Interim report Q1/2020 · 2020-04-29 · tissue paper production line for professional...

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


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


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



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


EUR million

Comparable operating result, quarterly

Change in comparable operating result

Metsä Group8


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


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


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%


Equity ratio


43.9 45.0

53.156.2 56.2

0

10

20

30

40

50

60

2016 2017 2018 2019 3/2020

%


Interest-bearing net liabilities


1,033 993

463374

449

0

300

600

900

1 200

1 500

2016 2017 2018 2019 3/2020

EUR million


Capital expenditure


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.


Personnel


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%


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



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


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



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



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



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



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



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


• 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


Summary

Market outlook

Metsä Group’s comparable operatingresult is in Q2 2020 expected toimprove from Q1 2020


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


Event after the period

Main equipment purchases forRauma and Kemi agreed

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