Metsä Group Interim report Q1–Q3 2021

Metsä Group Interim report Q1–Q3 2021Ilkka HämäläPresident and CEO

27 October 2021

• Sales EUR 4,457 million (Q1–Q3 2020: EUR 3,698 million)• Operating result* EUR 694 million (274)• Operating result* 15.6% of sales (7.4)• Return on capital employed* 16.4% (7.0) • Sales and operating result in January–September improved

mainly due to higher sales prices of pulp• Result in the comparison period was weakened by the strikes at

the Finnish mills• Exchange rate fluctuations had a negative result effect of

approximately EUR 99 million

27 October 2021 3

Excellent result for Metsä Group

Metsä Group Q1–Q3 2021

*comparable

• Average market prices of pulps were stable compared to Q2, but markedly higher than in Q3 2020

• Demand for paperboards remained strong, and their average prices increased significantly

• Metsä Board decided to invest EUR 210 million in increasing the folding boxboard capacity at the Husum mill in Sweden

• Metsä Wood announced its plan for a new EUR 200 million Kerto LVL® mill in Äänekoski

• Metsä Spring invested in the start-up company Innomost, which produces bioactive products from forest industry side streams

• Metsä Tissue announced its plan for a new tissue paper mill in the United Kingdom

27 October 2021 4

Events during the third quarter


• Metsä Group launched a programme, implemented between 2021 and 2030, to take part in regionally relevant and effective development projects that improve biodiversity and the state of waters in Finland.

• Metsä Group expanded its ecological sustainability programme for commercial forests with measures related to safeguarding biodiversity of herb-rich forests

• European Commission started an inspection on Metsä Fibre, a subsidiary of Metsäliitto Cooperative, under EU antitrust rules as part of larger investigation of the market for wood pulp sector

27 October 2021 5

Events after the reporting period


27 October 2021 6

1,216 1,235 1,2601,328

1,4281,477

1,386 1,419 1,4381,372 1,374

1,290 1,2531,200 1,245

1,357 1,400

1,542 1,515

0

200

400

600

800

1 000

1 200

1 400

1 600

Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2/21 Q3/21

Sales, quarterly EUR million


27 October 2021 7

128119

134

185

208 210223

208

180

128110

7662

96115

94

174

242

278

0

50

100

150

200

250

300

Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2/21 Q3/21

EUR million

Comparable operating result, quarterlyMetsä Group Q1–Q3 2021

27 October 2021 8

Change in comparable operating resultEUR million

Comparable operating result Q1–Q3/2020 274Sales prices 508Sales volumes 83Exchange rates (after hedging) -99Change in wood raw material unit costs -4Change in raw material, energy and other variable costs unit costs -62Employee costs -52Maintenance and other fixed costs -7Change in inventories (including volume and valuation) 44Depreciation and other 8

Comparable operating result Q1–Q3/2021 694


27 October 2021 9

Items affecting comparability

EUR million Q1–Q3/2021

OPERATING RESULT (IFRS) 652

Items affecting comparability:

Items related to the impairments of the existing Kemi pulp mill 38.2

Sale of a land area not related to Metsä Board’s business operations -7.0

Costs of the fire on the chip conveyor at Husum pulp mill 5.8

Impairment in the current paperboard production assets of Husum 4.6

Items affecting comparability, total 41.6

COMPARABLE OPERATING RESULT 694


27 October 2021 10

Comparable ROCE Metsä Group – Q3 2021

11.2

17.1

11.0

7.0

16.4

0

2

4

6

8

10

12

14

16

18

1-9/2017 1-9/2018 1-9/2019 1-9/2020 1-9/2021

%

Target > 12%

27 October 2021 11

Equity ratio

45.0

53.156.2 57.2

60.5

0

10

20

30

40

50

60

70

2017 2018 2019 2020 9/2021

%


27 October 2021 12

Interest-bearing net liabilities

993

463

374

168

-66-100

100

300

500

700

900

1 100

2017 2018 2019 2020 9/2021

EUR million


27 October 2021 13

Capital expenditure

631

274 260

401

637

0

200

400

600

800

1000

1200

2017 2018 2019 2020 9/2021

EUR million

Includes investments in leased fixed assets.

Full year estimate


27 October 2021 14

Personnel

9,126 9,310 9,265 9,213 9,470

0

3 000

6 000

9 000

12 000

2017 2018 2019 2020 9/2021


• In Finland, wood trade by private forest owners in January–September was clearly more active than in the previous year

• Weather conditions for harvesting were good and the wood market situation in the Baltic Sea area was fairly balanced

• Deliveries to the customers were carried out well, excluding birch logs. Metsä Group delivered 26.8 million m3 of wood (24.4)

• The strong demand for sawn timber increased log prices. The price of pulpwood returned to the level at the beginning of the year

27 October 2021 15

Wood trade was active in Finland

Metsä Forest – Wood Supply and Forest Services

Sales and comparable operating result EUR million

526 508474 465

431471

449469

517 507 497

11.3

5.65.0

5.6

3.4 3.9

6.2

8.9 8.4

6.7

11.3

0

3

6

9

12

15

18

0

100

200

300

400

500

600

Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2 Q3

Sales Operating result

• Metsä Wood’s sales and profitability increased from the previous year, due to the strong demand in all product categories and main markets

• The prices of spruce plywood and Kerto LVL increased. The prices of birch plywood were at the previous year’s level

• Increased raw material prices and challenges in the availability of birch logs affected profitability negatively

• Metsä Wood is planning a EUR 200 million Kerto LVL mill investment in Äänekoski. The investment decision requires the local detailed plan for the area and the environmental permit

27 October 2021 16

Good demand for engineered wood products

Metsä Wood – Wood Products Industry

111119

111

93 87

104

122 117

141156

142

1.83.3 3.1

-1.1-3.3

1.3

6.64.7

7.0 6.85.4

-4

0

4

8

12

16

20

-30

0

30

60

90

120

150

Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2 Q3



• Demand for softwood pulp strengthened in Europe but in China declined seasonally during the summer

• USD-denominated market prices of long-fibre pulp increased by 38% in Europe and 55% in China, compared to Q1–Q3 2020

• Sales volumes of pulp and sawn timber increased substantially in Q1–Q3 2021 compared to corresponding period in 2020

• Market prices of sawn timber in Q1–Q3 2021 increased by 58% compared to the corresponding period in 2020

• Construction of the sawmill in Rauma and the bioproduct mill in Kemi is progressing as planned

27 October 2021 17

Demand for pulp and sawn timber was very strong

Metsä Fibre – Pulp and Sawn Timber Industry

623

556 567

490

412 428 459

528561

652693

122.4

83.1

33.29.9

-21.316.0 17.1

-8.0

72.1

168.0

225.9

-40

0

40

80

120

160

200

240

280

-100

0

100

200

300

400

500

600

700

Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2 Q3



350

500

650

800

950

1100

1250

1400

350

500

650

800

950

1100

1250

1400

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20 21

Long-fibre pulp, Europe, EUR

USD / EUR USD / EUR

18

Price of pulp (PIX) in Europe and China

Long-fibre pulp Europe, USD

Short-fibre pulp, Europe, USD

Short-fibre pulp, Europe, EUR Long-fibre pulp China, USD

Source: Fastmarkets Foex27 October 2021

Metsä Fibre – Pulp and Sawn Timber Industry

• Operating result improved due to the increased prices and delivery volumes for paperboards, and the increased average prices for market pulp

• Cost inflation was rapid. Prices of electricity and certain chemicals increased in particular

• Exchange rate fluctuations had a negative result impact of around EUR 40 million

• Renewal of Husum pulp mill is progressing as planned• Metsä Board invests EUR 210 million in increasing

folding boxboard capacity in the Husum mill in Sweden

27 October 2021 19

The paperboard market continued very strong

Metsä Board – Paperboard Industry

487 477 489 478 472 473 471 473494

556516

61.8

41.0 42.5 39.133.8

60.5 62.5 64.5

88.8 102.5104.0

0

20

40

60

80

100

120

0

100

200

300

400

500

600

Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2 Q3



500

600

700

800

900

1000

1100

1200

500

600

700

800

900

1000

1100

1200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Folding boxboard

White-top kraftliner

Market prices of paperboard in Europe

Sources: Fastmarkets RISI & Fastmarkets FOEX

EUR/ tonne EUR/ tonne

27 October 2021 20

Metsä Board – Paperboard Industry

• Sales in 2020 grew due to exceptional demand peak, but impact of the pandemic on sales in 2021 has been negative

• Sales of tissue papers picked up during the Q3 2021 as the coronavirus restrictions eased

• Lower sales volumes and significantly higher raw material and energy costs decreased the result

• Sales of greaseproof papers increased • A new tissue paper production line started up at the

Raubach mill in Germany• Metsä Tissue is planning to invest in a new tissue

paper mill in the United Kingdom

27 October 2021 21

The profitability for tissue papers was lower than normal

Metsä Tissue – Tissue and Greaseproof Papers

267 266 263 264

293

224237

258

224 224239

10.513.5

22.826.6

40.5

23.6 22.727.1

16.4

0.7

-3.7-10

0

10

20

30

40

50

60

-50

0

50

100

150

200

250

300

Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4 Q1/21 Q2 Q3



• Demand for engineered wood products remains strong in all product categories

• Demand for softwood pulp remains good in Europe. In China there are uncertainties related to market pulp consumption in Q4

• Demand for sawn timber is expected to decline seasonallytowards the winter

• Demand for paperboards is expected to remain good. The delivery volumes in Q4 2021 are expected to decline from Q3 2021 due to annual maintenance shutdowns, low inventory levels, and a potentially seasonally slower December

• Demand for tissue papers is expected to increase as the restrictions resulting from the pandemic are lifted

• Growth trend in greaseproof paper demand continues

Market outlook

27 October 2021

Summary

Metsä Group’s comparable operating result is in October–December 2021 expected to weaken from July–September 2021

Near-term result outlook

27 October 2021

Summary

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Metsä Group Interim report Q1–Q3 2021

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