Investor Presentation 2Q 2014 5.9. 2014 Metsä Board Metsä Group
Content Investment highlights and update General presentation 3 Investment Highlights 52 General Info 4 Financial Targets and Dividend 62 Business Portfolio 9 Strategy 69 Operations 25 2Q 2014 Results & Outlook 75 Deliveries 35 Price Development 77 Sourcing 38 Investments 85 Sustainability 90 Owners 92 Market Positions Funding and debt information 41 Divestments 42 Funding and Debt 49 Credit Facilities 50 Rating History Metsä Board 2 Metsä Group
Investment Highlights ‒ Strong growing core in high-quality paperboards ‒ European market leader in folding boxboard and global market leader in coated white top kraftliner ‒ Increased capacity in the most profitable part of the company, folding boxboard and linerboard ‒ Good further growth potential in both folding boxboard and linerboard ‒ Profitability of the paperboard production top class in its field ‒ Significant net debt reduction in recent years ‒ Material productivity improvement in recent years Metsä Board 3 Metsä Group
Financial Targets and Dividend Metsä Board Metsä Group
Financial T argets ‒ ROCE target set at a minimum of 10% on average over the business cycle ‒ Net gearing not to exceed 100% Minimum ROCE 10%* Maximum net gearing 100% 13,5% 184% 10,2% 8,8% 7,6% 7,6% 145% Minimum target of 10% 6,4% 6,2% 137% 126% 4,8% 119% 3,4% 2,8% 106% 2,1% 99% 1,6% 95% 0,9% 90% 0,5% 84% 82% 83% 83% 72% 65% 70% -0,5% Maximum level of 100% -5,6% 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 2Q14 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1H14 * Excluding non-recurring items Metsä Board 5 Metsä Group
Main Actions to Exceed ROCE 10 % ‒ Increase of folding boxboard and linerboard sales and secure healthy price levels ‒ Gradual reduction of unprofitable paper production in Husum ‒ Profitability improvement of Gohrsmühle mill ‒ Continuous improvement of productivity and cost competitiveness ‒ Efficient supply chain and working capital management 6 Metsä Board Metsä Group
Dividend Policy - The Company remains committed to an attractive and competitive dividend - Metsä Board's dividend policy is stable and rewarding to shareholders, and aims at paying a dividend of at least 1/3 of the Company's EPS on average over the business cycle, nonetheless taking into account the Company's net gearing target Metsä Board 7 Metsä Group
Dividend Yield 3 12 % 2,5 8,6% 10 % 6,9% 7,2% 2 8 % 5,5% 5,6% 1,85 1,5 6 % 4,1% 4,3% Dividend yield, % 3,3% 2,8% 1 4 % 1,13 € per share 1,09 2,1% 3,0% 3,4% 1,4% 1,3% 0,5 2 % 0,0% 0,52 0,51 0,51 0,51 0,50 0,0% 0,46 0,0% 0,0% 0,38 0,37 0,26 0,30 0,25 0,06 0,06 0,00 0,00 0,09 0,00 0,00 0,06 0,09 0,19 0,23 0,12 0,12 0,14 0 0 % -0,25 -0,43 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -0,59 -0,5 -2 % -0,79 -0,83 -1,21 -1,09 -1 -4 % -1,58 -1,5 -6 % -2 -8 % Earnings per share Dividend per share Dividend yield Dividend yield calculated from annual average B-share volume weighted price Metsä Board 8 Metsä Group
Strategy Metsä Board Metsä Group
Consistent Strategy Largest Folding Boxboard Producers in Europe ‒ Paperboard is Metsä Board’s core business ‒ Focus on high-quality paperboards ‒ Smaller but healthier paper business ‒ Heavy re-engineering and successful divestments Holmen Largest White Top Kraftliner and Fully Bleached ‒ Extensive fibre know-how and pulp self-sufficiency Kraftliner Producers in Europe ‒ Metsä Board’s role in Metsä Fibre’s planned new pulp mill in Äänekoski to be clarified latest early next year ‒ Continuous development towards Super Productivity Source: Metsä Board, Pöyry Management Consulting Oy Metsä Board 10 Metsä Group
Paperboard incl. Market PulpAccountsAlready 75 per cent of Sales Sales distribution 2006 Sales distribution 2Q 2014 Paper Paperboard 18% Market pulp 15% merchanting 26% Paper 24% Paperboard 61% Paper 56% Metsä Board 11 Metsä Group
Metsä Board’s Productivity Has Been Improved by Almost 70 per cent Since 2006 Capacity per employee in Metsä Board’s board, paper and pulp mills 1 800 1 500 tonnes/a/person 1 200 900 600 300 2006 2007 2008 2009 2010 2011 2012 2013 Year end 12 Metsä Board Metsä Group
Packaging Materials Is about EUR 600 Billion Business Globally and It Is Growing Strong Highest growth in paperboard packaging, accounting ‒ Growing population for the largest share of the total ‒ Urbanization Wood fibre ‒ Environmental awareness based materials Others 36 % 64 % ‒ Safety Source: Smithers Pira Metsä Board 13 Metsä Group
Metsä Board’s High-Quality Paperboards Help the World’s Leading Consumer Goods Companies to Succeed Metsä Board’s grades’ global ‒ Increasing sales demand growth 3-4 %/a High-quality fresh forest fibre cartonboards ‒ Improving sustainability and linerboards ‒ Securing product safety Recycled and fresh forest fibre based cartonboards and linerboards ‒ Decreasing costs Lower quality recycled fibre paperboards Metsä Board 14 Metsä Group
Metsä Board’s Renewed Fresh Forest Fibre Based Paperboard Portfolio Fits Well to Consumer Goods Companies’ Demand Graphical Consumer Goods Companies end-uses Merchants Carton printers Corrugated box manufacturers Folding boxboard Fresh forest fibre linerboard 15 Metsä Board Metsä Group
Profitability of Metsä Board’s Core Business Is the Best in Its Field Operating result, excl. non-recurring items, % of sales 16 Metsä Board Metsä Group
As the FBB Market Leader Metsä Board Continues Steady Organic Growth and Responsible Pricing in the Domestic Markets in Europe ‒ Metsä Board continues to offer an ecological, safe and cost competitive option for brand owners to replace plastics and recycled fibre board ‒ Totally new business in food service and cup stock end uses ‒ Large and fast growing segment ‒ Best-in class customer service concept Total cartonboard market 7 million t/a ‒ New advanced supply chain model Demand growth 2 %/a ‒ Good technical service WLC 50% ‒ Healthy price levels a key priority for Metsä Board also in the future FBB 35% SBS 7% CUK 8% Sources: Smithers Pira & Metsä Board 17 Metsä Board Metsä Group
Metsä Board Continues Good Growth in the Highest Quality Segment in Asia. Timing not Good for Aggressive Growth ‒ Metsä Board is the cartonboard quality benchmark in Asia ‒ Responsible consumer goods companies promote good packaging ‒ Sustainability ‒ Traceable raw materials ‒ Product safety ‒ Leading Chinese producers not in general targeting the Total cartonboard market 15 million t/a highest quality segment Demand growth 5%/a ‒ Fast demand growth in commodity segment ‒ Lack of high quality raw material WLC 73% FBB 22% ‒ Metsä Board continues to grow in Chinese high quality Others 5% segment and increases activities in other main Asian markets Sources: Metsä Board & Risi 18 Metsä Board Metsä Group
Metsä Board Offers a Sustainable, Safe and Cost-Competitive Option for Consumer Goods Companies in North America ‒ Sustainability and safety increasingly important also for North American brand owners ‒ Consumption mainly in conventional heavy cartonboards ‒ Four leading cartonboard producers dominate US market and most of them are integrated to converting ‒ Product development has not been in focus ‒ No investments in new technology and capacity Total cartonboard market 6,5 million t/a ‒ Difficult position for independent non-integrated converters Demand growth 1 %/a ‒ Timing is perfect for Metsä Board to become a strong long-term WLC 34% partner for local brand owners and converters SBS 34% CUK 27% ‒ Metsä Board’s FBB even over 30% lighter in weight FBB 5% ‒ Customer service ability as good as best local players’ Sources: Smithers Pira & Metsä Board 19 Metsä Board Metsä Group
In Addition to Folding Boxboard Metsä Board Develops Strongly and Successfully Its Linerboard Business Metsä Board’s fresh forest fibre linerboard deliveries in 1H 2014 ‒ Successful transformation of Kemi mill to high end doublecoated segment Asia-Pacific 1% ‒ Profitability to a totally new level Americas ‒ Fully booked for several years 36% ‒ Husum’s light weight fully bleached linerboards complete Metsä Board’s EMEA offering enabling growth in totally new end uses 63% ‒ Steady decrease of unprofitable paper volumes in Husum Metsä Board’s fresh forest fibre linerboard deliveries to North America, 1,000 tonnes ‒ 70 % growth in North America during the past 5 years 150 +70% ‒ USA today the biggest single market 120 ‒ All leading corrugated box manufacturers as main customers 90 60 30 0 2009 2010 2011 2012 2013 Metsä Board 20 Metsä Group
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