Metsä Board

Metsä Board Results 2014

Metsä Board

Highlights in 2014

2

‒ Profitability improved from previous year

‒ Cash flow was strong and net debt reduced clearly to EUR 427 million

‒ Paperboard delivery volume increased significantly and price levels were stable

‒ Metsä Board’s folding boxboard was successfully launched to North America

and to the global food service segment

‒ Production volumes and efficiencies improved

‒ Final steps in transformation to a paperboard company were introduced

‒ Mika Joukio started as the new CEO in October and the organization was renewed as of 1 Jan 2015

Metsä Board

0,17

0,27

0

0,1

0,2

0,3

0,4

2013 2014

Metsä Board’s Profitability Improved in 2014

5878

0

25

50

75

100

2013 2014

6,4

9,1

0

3

6

9

12

2013 2014

2019 2008

0

1000

2000

3000

2013 2014

104

137

0

40

80

120

160

2013 2014

Sales Operating result, excl. non-

rec. items

Result before taxes, excl.

non-rec. items

m€ m€

m€

114117

0

40

80

120

160

2013 2014

Operating result

m€

Result before taxes

m€

ROCE, excl. non-

rec. items

%

Board of Directors is proposing to the AGM a dividend of EUR 0.12 per share for the financial year 2014

3

Earnigs per share, excl.

non-rec. items

€ per share

49

100

0

25

50

75

100

125

2013 2014

Metsä Board

30

1929 28

6

2520

24 2636 35 37

0

10

20

30

40

50

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

545 522 532 509 535 503 514479502 501499494

0

200

400

600

800

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

-9

1710 9

1927

32

918

4

2021

-10

0

10

20

30

40

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Sales Operating result excl. non-rec. items

Result before taxes excl. non-rec. items

Operating Result in 4Q 2014 Roughly at Previous Quarter Level

4

EUR million EUR million

EUR million

Metsä Board

‒ Folding boxboard deliveries decreased seasonally slightly in 4Q 2014

‒ Market prices were stable but stronger USD improved average price

‒ Good progress in North America and in the food service segment continued

‒ Result was weakened by decreased speciality paper deliveries partly

due to political and economic uncertainties in Ukraine and Russia

‒ No material price changes in folding boxboard 2015 annual contracts

compared to previous year

5

EBIT, excl. non-recurring items

Sales

No Material Change in Cartonboard Business Area’s

Profitability in 4Q 2014

EUR million

EUR million

1820

1817

20

1215

10

0

6

12

18

24

30

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

224230219214208220218

222

0

50

100

150

200

250

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Metsä Board

Linerboard and Paper’s Result Improved Clearly in 4Q 2014

‒ Result was improved by higher fresh forest fibre linerboard average price due

to strengthened USD

‒ Linerboard deliveries decreased seasonally slightly in 4Q 2014

‒ Uncoated fine paper delivery volume increased and price level was

unchanged. Coated paper delivery volume and average price decreased

‒ Market pulp volumes were slightly lower but price increased due to USD

‒ Sales of CO2 rights had a positive result impact

‒ Linerboard deliveries are in 1Q 2015 expected to improve. No major price

changes in sight

‒ Paper deliveries are in 1Q forecast to increase but average price decrease

‒ No material market related changes foreseen in pulp business in 1Q

6

EBIT, excl non-recurring items

EUR million

EUR million

Sales

20

15

24

32

1516

7

20

0

6

12

18

24

30

36

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

271262

271 265288

269 267250

0

50

100

150

200

250

300

350

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Metsä Board

EUR -30 Million in Net Non-Recurring Items Booked in 4Q 2014

Main items:

‒ EUR 26 million impairment of fixed assets in the Cartonboard business area related to

the loss-making Gohrsmühle mill in Germany

‒ EUR 13 million cost provision in the Linerboard and Paper business

area related to planned discontinuation of paper production at Husum

‒ EUR 7 million sales gain related to Niemenranta property in Tampere, Finland

7

Total non-recurring items in 2014 EBIT were EUR -20 million

Metsä Board

Net Debt Reduced to EUR 427 Million Thanks to Strong Cash Flow

‒ Cash flow from operations EUR 83 million in 4Q and

EUR 210 million in 2014 (EUR 127 million in 2013)

‒ Gross debt EUR 684 million and net debt EUR 427 million at end 2014

( EUR 597 million at end 2013)

‒ Net gearing 51 % (70 %), equity ratio 39 % (41 %) and average

interest rate 4,0 % (4,8 %) at the end of 2014

‒ Net debt to EBITDA dropped to below 2

‒ Strong liquidity position

‒ Moody’s raised Metsä Board’s credit rating to B1 in 4Q 2014

8

Net Debt / EBITDA

Net Debt

427

827

0

250

500

750

1000

2010 2011 2012 2013 2014

1,8

2,7

0

1

2

3

4

5

2010 2011 2012 2013 2014

EUR million

Metsä Board

Short-Term Profitability Outlook

9

‒ Metsä Board’s operating result excluding non-

recurring items is in the first quarter of 2015

expected to improve slightly compared to the last

quarter of 2014

Metsä Board

Metsä Board’s Paperboard Deliveries Increased by 10 % in 2014

10

+ 7 %

169 176 185 185 189 192 197185 191 197

210 203

8085

93 8594 93

95

91

110108

118109

0

60

120

180

240

300

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Fresh forest fibre linerboard

Folding boxboard

+ 10 % 1000 tonnes

Metsä Board

11

‒ USD and SEK vs. Euro has moved to favourable direction from Metsä Board’s viewpoint in 2H 2014

and in early 2015

‒ Hedging of the main foreign currency flows is 5-7 months

‒ Positive net EBIT impact after hedges in 2014 was EUR 15 million vs. 2013

‒ Incremental positive impact expected in 2015

‒ Annual unhedged EBIT sensitivity of 10 % change vs. euro

‒ EUR 45 million in USD

‒ EUR 20 million in GBP

‒ Reversed EUR 30 million SEK

‒ Segment numbers reflect exchange rate changes rapidly

but hedge accounting result in Other operations balance the impact

Exchange Rates Changes Favourable for Metsä Board

Metsä Board

Metsä Board Grows Its Paperboard Business, Plans to Fully Exit Paper Production and Considers a Rights Issue

‒ Major growth step in the folding boxboard business thanks to EUR 170 million

investment in a new production line and related infra at Husum mill in Sweden

‒ Linerboard volumes from Husum to be tripled from 2014 level to close to

300 000 tonnes fully from 2018

‒ Planned discontinuation of Husum mill’s paper production mostly by

the end of 2015 and fully by the end of 2017

‒ Measures to eliminate losses of Gohrsmühle mill in Germany in process

‒ These final steps of transformation expected to be financed by current liquidity,

operating cash flow and potentially also by a rights issue in 1Q 2015

12

Metsä Board

New Volumes to be Sold Mainly to North America, Where Metsä

Board’s Paperboard Volumes Increased Over 40% in 2014

13

Fresh forest fibre linerboard deliveries to

North America, 1,000 tonnes

0

30

60

90

120

150

180

2009 2010 2011 2012 2013 2014

FBB deliveries to North America, 1,000 tonnes

0

5

10

15

20

25

30

2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

FBB volume target in North America is

over 300 000 t/a in mid-term

Linerboard volume target in North

America is over 250 000 t/a in mid-term

Metsä Board

New Function Based Organization in Place As of 1 January 2015

‒ Reporting segments are from 1Q 2015 onwards the following:

‒ Paperboard

‒ Non-core operations

‒ Paperboard segment includes folding boxboard, fresh forest fibre linerboard, wallpaper base and

market pulp businesses. Metsä Fibre result share will be allocated to Paperboard

‒ Non-core operations include Husum and Gohrsmühle mills’ paper businesses

‒ The restated historical figures will be released during February 2015

14

Metsä Board

Significant Financial Improvements Thanks to Finalization of the Transformation

‒ Based on growth of paperboard business and discontinuation of Husum’s paper

production, Metsä Board’s annual sales is expected to remain rather stable

‒ Operating result excluding non-recurring items expected to improve by

approximately EUR 50 million compared to 2014

‒ Mostly in 2017 and fully in 2018

‒ Investment shutdown and accelerated depreciations in Husum is forecast to

impact operating result negatively roughly by EUR 20 million in 2015

‒ Additionally, elimination of Gohrsmühle mill’s losses would lead to:

‒ Annual sales reduction of approximately EUR 90 million

‒ Operating result improvement of approximately EUR 20 million

15

Metsä Board

Metsä Board Updates Its Long-Term Financial Targets

New targets:

Return on Capital Employed (ROCE) minimum 12 per cent from 2017 onwards

Net gearing maximum 70 per cent

‒ Old targets were ROCE minimum 10 per cent and net gearing maximum 100 per cent

‒ Dividend policy remains unchanged. The aim is to pay a dividend of at least 1/3 of the

EPS, taking into account the net gearing target

16

Metsä Board

Key Priorities in 2015

‒ Grow profitably the paperboard businesses globally

‒ Successful implementation of the investment projects in Husum

‒ Secure good price levels

‒ Further improve best in class product quality and supply chain

‒ Develop new products for existing and new end uses

‒ Elimination of the losses from Gohrsmühle mill

‒ Continue productivity improvements and cost savings

17

6,4

4,8

3,4

7,6

-5,6

9,1

-6

-3

0

3

6

9

12

15

2009 2010 2011 2012 2013 2014

Target min. 12 % from 2017 onwards

ROCE, excl. non-recurring items

%

Metsä Board

Appendix

Metsä Board

6,4

4,8

3,4

7,6

-5,6

9,1

-6

-3

0

3

6

9

12

15

2009 2010 2011 2012 2013 2014

ROCE % and EBIT, % of Sales

19

EBIT % of sales excl. non-recuring items ROCE %, excl. non-recurring items

6,8

-6,2

6,6

2,4

3,6

5,2

-8

-6

-4

-2

0

2

4

6

8

10

2009 2010 2011 2012 2013 2014

Target min. 12 % from 2017 onwards

Metsä Board

EBITDA Development

20

EBITDA excl. non-recurring items

236

208

186179

305

44

0

60

120

180

240

300

2009 2010 2011 2012 2013 2014

EUR million

Metsä Board

Business Area Performance – Comparison to Previous Quarter

Sales

4Q 2014 3Q 2014

21

230

271

224

265

0

50

100

150

200

250

300

Cartonboard Linerboard andPaper

18

24

17

32

0

7

14

21

28

35

Cartonboard Linerboard andPaper

Operating result, excluding non-recurring items EUR million EUR million

Metsä Board

Business Area Performance – Comparison to Previous Year

2014 2013

22

868

1075

887

1068

0

300

600

900

1200

Cartonboard Linerboard andPaper

57 54

72

90

0

25

50

75

100

Cartonboard Linerboard andPaper

Sales Operating result, excluding non-recurring items EUR million EUR million

Metsä Board

Balance Sheet Ratios

23

777

827

783

625597

427

17,7

2,7

4,4

3,42,9

1,8

0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013 2014

0

2

4

6

8

10

12

14

16

18

20

Net Debt and Net Debt/EBITDA* Net Gearing

51

84 83

106

7270

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014

Net debt,

EUR million Net debt/EBITDA

*Excluding non-recurring items

%

Metsä Board

EUR / tonne

Folding Boxboard Market Price in Europe

2004 – 2014

24

Source: Pöyry Management Consulting

800

900

1000

1100

2009 2010 2011 2012 2013 2014

Metsä Board

500

600

700

800

900

2009 2010 2011 2012 2013 2014

25

Uncoated White-Top Kraftliner Market Price in Europe

2009 – 2014

Source: Foex

EUR / tonne

Metsä Board

EUR / tonne

Paper and Pulp Market Price in Europe

1998 – 2014

Coated fine paper (100 g)

Uncoated fine paper (B-copy, 80 g)

Softwood pulp NBSK

Coated magazine paper LWC (60g)

Source: Foex, Reuters

EUR/USD

EUR/USD

400

500

600

700

800

900

1000

1100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0,8

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7

26

Metsä Board

Ownership Structure 31.12.2014

Shares Votes

Source: Euroland 27