Metsä Group presentation of Metsa Group 2016 results

Metsä Group Results 2016

Kari JordanPresident & CEO

2 February 2017

• Sales EUR 4,658 million (EUR 5,016 million)• Comparable operating result EUR 439 million (537)

or 9.4% of sales (10.7) • Comparable return on capital employed 10.2% (13.6)• Profitability in comparison to the previous year was affected by

the lower market price and delivery volume of pulp and the start-up phase of the new folding boxboard machine at Husum

2 February 2017 Metsä Group2

Profit-making ability continued good

Metsä Group – Result 2016

• Construction of bioproduct mill at Äänekoski progressed as planned – 84% complete at the end of the year

• Technical problems of the folding boxboard production line at Husumwere solved, and the average price of order intake reached a good level

• Installation of the extrusion coating line at Husum proceeded as planned

• Expansion of Kerto® LVL mill at Lohja is progressing according to plan• Metsä Wood divested its glulam business in Hartola• Finnish sawmills were transferred from Metsä Wood to

Metsä Fibre


Events in the third quarter



Annual sales


EUR million

5,001 4,939 4,970 5,0164,658

0

1000

2000

3000

4000

5000

6000

2012 2013 2014 2015 2016


1,264 1,242 1,214 1,219 1,254 1,2651,204

1,248 1,2551,330

1,225 1,2051,156 1,184 1,143 1,175

0

200

400

600

800

1 000

1 200

1 400

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

Quarterly sales


EUR million


Comparable operating result


EUR million

256

343

418

537

439

0

100

200

300

400

500

600

2012 2013 2014 2015 2016


Operating result


8994

7387

10592

104117

129137

149

123109

120

103 10794 89

63

88

70

160

103

84

118

154142

128

107119

107110

0

20

40

60

80

100

120

140

160

180

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

Comparable operating result Operating result (IFRS)

EUR million


130119

63

3

5364 68 71

89 94

73

87

10592

104117

129137

149

123

109120

103 107

0

20

40

60

80

100

120

140

160

Q1/

11

Q2/

11

Q3/

11

Q4/

11

Q1/

12

Q2/

12

Q3/

12

Q4/

12

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

Comparable operating result


EUR million

Change in comparable operating resultEUR million

Comparable operating result 2015 537

Sales prices -244

Sales volumes -21

Exchange rates 5

Raw materials and energy 34

Employee costs 35

Maintenance 8

Depreciation 18

Change of inventories 50

Other 17

Total -98

Comparable operating result 2016 439



Items affecting comparability 2016



EUR million 2016

Operating result (IFRS) 442.3

Items affecting comparability:

Metsä Board / Items related to paper production at Kyro -7.8

Metsä Tissue / Divestment of the business in Russia -4.4

Metsä Board / Loss related to divestment of Alrec Boiler Oy -1.1

Metsä Fibre / Sales gain related to Metsä-Botnia Metsät Oy 11.7

Metsä Board / Additional sales price related to Hallein 4.4

Metsä Wood / Sales gain from the glulam business 1.7

Other items, net -0.8

Items affecting comparability, total 3.7

Comparable operating result 438.6


Comparable ROCE


7.1

9.1

11.4

13.6

10.2

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016

%

Target >10%


Equity ratio


34.737.9 37.9

43.2 43.9

0

5

10

15

20

25

30

35

40

45

50

2012 2013 2014 2015 2016

%


Interest-bearing net liabilities


1,6091,510

938

610

1,033

0

250

500

750

1 000

1 250

1 500

1 750

2 000

2012 2013 2014 2015 2016

EUR million


Capital expenditure


204 214

143

492

758

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

EUR million

Income statement



EUR million 2016 2015 ChangeSales 4,657.9 5,016.0 -358.1

Other operating income 70.5 95.7 -25.2

Operating expenses -4,041.8 -4,311.4 269.6

Depreciation and impairment losses -244.3 -258.2 13.9

Operating result 442.3 542.1 -99.8

Comparable operating result 438.6 537.4 -98.8

Share of results from associated companies and joint ventures -1.1 11.2 -12.3

Exchange gains and losses -5.7 -1.2 -4.6

Other net financial items -74.9 -83.8 8.9

Result before income tax 360.6 468.4 -107.8

Key figures



2016 2015 ChangeReturn on capital employed, % 10.2 13.7 -3.5

Comparable return on capital employed 10.2 13.6 -3.4

Return on equity, % 11.2 15.9 -4.7

Comparable return on equity 11.0 15.8 -4.8

Equity ratio, % 43.9 43.2 0.7

Net gearing ratio, % 40 25 15

Interest-bearing net liabilities, EUR million 1,033 610 423

Capital expenditure, EUR million 758 492 266

Personnel at end of period 9,300 9,599 -299

Cash flow statement I



EUR million 2016 2015

Cash flow from operating activities

Result for the period 279.9 355.7

Adjustments to result for the period 350.5 387.2

Interest received 3.0 4.0

Interest paid -54.2 -68.9

Dividends received 1.6 5.7

Taxes -115.5 -97.3

Other financial items, net 8.6 -11.9

Change in working capital -126.2 221.3

Net cash flow from operating activities 347.8 796.0

Cash flow statement II



EUR million 2016 2015Net cash flow from operating activities 347.8 796.0

Purchase of shares 0.0 -2.4Investments -757.9 -491.6Sales of assets and others 62.6 40.2Changes in members’ capital and other capital 65.9 106.4Interest on members’ capital and dividends paid -120.2 -94.9Change in long-term loans and committed facilities 174.8 -180.8

Change in cash and cash equivalents -226.8 172.8

Cash and cash equivalents at beginning of the period 1,120.8 947.9Translation differences and others 1.1 0.1Change in cash and cash equivalents -226.8 172.8

Cash and cash equivalents at end of the period 895,1 1,120.8


Personnel at year end


11,44710,736 10,410

9,599 9,300

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2012 2013 2014 2015 2016

Wood Supply and Forest Services

Wood Supply and Forest Services


Metsä Forest – Wood Supply and Forest Services

EUR million 2016 2015 Change

Sales 1,534.4 1,518.1 16.3


Operating expenses -1,507.4 -1,493.1 -14.3


Operating result 30.9 29.0 1.9

Items affecting comparability, total - - -

Comparable operating result, EUR million 30.9 29.0 1.9

% of sales 2.0 1.9 0.1

Wood supply and stumpage prices were stable in Finland • Wood was harvested and delivered as

targeted • A total of approximately 30.5 million cubic

metres (30.0) of wood was delivered• Weather conditions for harvesting were

good throughout the year• Sales of forest services grew • Nearly 20% of the wood sourced from

private forests were bought electronically. As to the forest management services, the figure was about 25%


Comparable operating resultEUR million

Metsä Forest – Wood Supply and Forest Services

8.6

7.0

4.5

8.18.7

6.9 7.06.3

7.8

6.5

7.7

8.9

0

1

2

3

4

5

6

7

8

9

10

Q1/

14

Q2/

14

Q3/

14

Q4/

14

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Wood Products Industry

Wood Products Industry


Metsä Wood – Wood Products Industry

EUR million 2016 2015 ChangeSales 481.6 533.6 -52.0

Other operating income 12.2 8.1 4.1

Operating expenses -440.2 -516.2 76.0



Items affecting comparability, total -1.3 21.4 -22.7


% of sales 8.0 5.2 2.8

The delivery volumes of Kerto® LVL grew clearly• The delivery volumes and sales of Kerto® LVL grew

particularly in Northern Europe, Australia and North America

• The delivery volumes and sales of plywood decreased • The EUR 100 million investment programme in the

plywood and Kerto® LVL operations proceeded as planned– The expansion of Kerto® LVL mill at Lohja is progressing

– A new birch veneer peeling and drying line will be built at Äänekoski, and a new plywood mill in Estonia

– The customer test runs of the speciality veneer product under-way at Suolahti

• Finnish sawmills from Metsä Wood to Metsä Fibre • Glulam business in Hartola and project business in

Pälkäne were divested



Metsä Wood – Wood Products Industry

5.1

6.8

4.9

3.54.5

7.18.0 8.4 8.2

13.2

9.08.3

0

2

4

6

8

10

12

14

Q1/

14

Q2/

14

Q3/

14

Q4/

14

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Pulp and Sawn Timber Industry

Pulp and Sawn Timber Industry


Metsä Fibre – Pulp and Sawn Timber Industry


Other operating income 25.8 16.2 9.6




Items affecting comparability, total -6.2 - -6.2

Comparable operating result, EUR million 214.6 340.7 -126.1

% of sales 13.1 19.2 6.1

Price of pulp (PIX) 2008–2016

350

450

550

650

750

850

950

1050

350

450

550

650

750

850

950

1050

'08 ´09 ´10 ´11 ´12 ´13 ´14 ´15 ´16

Hardwood/EUR Softwood/EUR Hardwood/USD Softwood/USD



USD EUR

Source: Foex

Profitability was affected by lower sales prices of pulp

• Demand-supply balance of long-fibre pulp remained good

• In short-fibre, an increase in supply brought prices down

• Sales and operating result decreased due to the lower sales volumes and prices of pulp

• Metsä Group’s Finnish sawmills were transferred to Metsä Fibre

• Construction of the bioproduct mill at Äänekoskion schedule and on budget

– Investment in the bioproduct mill totalled EUR 508 million in 2016

– 84% per cent was complete at the end of the year– Focus shifting to testing and commissioning




58,4

43,9

53,1

69,0

82,0

95,6

83,479,7

61,253,2

46,453,7

0

10

20

30

40

50

60

70

80

90

100

Q1/

14

Q2/

14

Q3/

14

Q4/

14

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Paperboard Industry

Paperboard Industry


Metsä Board – Paperboard Industry






Items affecting comparability, total 5.2 -19.2 24.4

Comparable operating result, EUR million 137.5 179.9 -42.4

% of sales 8.0 9.0 -1.0



600650700750800850900950

100010501100

2010 2011 2012 2013 2014 2015 2016

Folding boxboard White-top kraftliner

Prices of folding boxboard and white-top kraftlinerin Europe 2010–2016

Sources: Pöyry Management Consulting and FOEX Indexes Ltd

EUR/tonne

Demand for fresh fibre paperboards continued good• Folding boxboard and white fresh fibre

linerboard volumes were up by 12% in 2016• Sales declined due to the planned major

decrease of fine paper volumes • Wallpaper base business was discontinued• Operating result weakened by the start-up of

the folding boxboard machine at Husum• Result development of the Finnish mills stable

– Five mills reached new annual production records

• Construction of the extrusion coating line at Husum is progressing as planned




36.1

28.3

35.2 36.9

43.247.0

54.6

35.1 35.0 35.8 34.0 32.8

0

10

20

30

40

50

60

Q1/

14

Q2/

14

Q3/

14

Q4/

14

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Tissue and Cooking Papers

Tissue and Cooking Papers


Metsä Tissue – Tissue and Cooking Papers

EUR million 2016 2015 ChangeSales 990.8 1,015.8 -25.0


Operating expenses -893.3 -938.5 45.2



Items affecting comparability, total 1.7 13.5 -11.8


% of sales 6.4 5.4 1.0

The operating result of Tissue and Cooking Papers improved• Operating result improved thanks to a better

product mix, increased efficiency, and lower production and transport costs

• Sales declined due to the discontinuation of consumer business in Russia and exchange rate changes

• Paper machine at Raubach and the greaseproof paper machine at Mänttä were renewed

• Several new products were brought to the market in 2016



Metsä Tissue – Tissue and Cooking Papers

11.89.7

19.621.1

15.8

7.6

13.2

18.6

13.5 13.2

15.8

20.6

0

5

10

15

20

25

Q1/

14

Q2/

14

Q3/

14

Q4/

14

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Summary

Outlook for the business areas 1/2Wood Supply and Forest Services• Wood demand focuses on regeneration and thinning sites to be harvested when the ground is

unfrozen and, in terms of energy wood, crown wood

Wood Products• Market demand for wood products is picking up, improving the order book for all sheet products• Construction in the UK market is expected to remain at a good level

Pulp and Sawn Timber• Global demand for pulp has continued to increase slightly, and there are no signs of considerable

negative changes in the market conditions • Demand in Asia will support the market balance of spruce sawn timber• Oversupply in pine sawn timber will continue, particularly due to the market situation in North Africa


Summary

Outlook for the business areas 2/2Paperboard• Demand for premium fresh fibre paperboards is expected to remain good in Europe and the

Americas • Market prices of folding boxboard and white fresh fibre linerboard are expected to remain stable• Paperboard deliveries in January–March 2017 are expected to grow from the previous quarter• Growth is supported by Husum's new folding boxboard production, marketed primarily to the

Americas

Tissue and Cooking Papers• In the tissue and cooking paper markets, demand is expected to remain stable in all market areas • Demand for tissue paper is expected to increase particularly in eastern Central Europe, and

demand for cooking papers in Asia


Summary

• Metsä Group’s comparable operating result is in the first quarter of 2017 expected to be roughly at a similar level as in the fourth quarter of 2016


Near-term outlook

Summary

Metsä Group presentation of Metsa Group 2016 results

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