Investor Presentation 4Q 2012 28.2. 2013 Metsä Board Metsä Group
Content Investment highlights and update General presentation 3 Investment Highlights 52 General Info 4 Strategy 59 Business Portfolio 20 Financial Targets 67 Operations 22 2012 Results & Outlook 73 Deliveries 33 Price Development 75 Sourcing 35 Dividend 83 Owners 38 Investments 85 Market Positions Funding and debt information 41 Divestments 42 Funding and Debt 50 Credit Facilities 51 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 ‒ Good further growth potential in paperboard ‒ Profitability of the paperboard production top class in its field ‒ Significant net debt reduction in recent years ‒ Material productivity improvement in recent years ‒ Measures to eliminate last paper business losses implemented ‒ Remaining paper and pulp units top class in their fields Metsä Board 3 Metsä Group
Strategy Metsä Board Metsä Group
Consistent Strategic Direction ‒ Cartonboard is our core business ‒ Growth through maximising capacity of existing mills ‒ Good growth in Europe and lot of potential outside Europe ‒ Smaller but healthier paper business ‒ Heavy re-engineering and successful divestments ‒ Extensive fibre know-how and pulp self-sufficiency ‒ Continuous development towards Super Productivity Metsä Board 5 Metsä Group
Strategic Transformation from a Paper Company to a Paperboard Company Has Been Successful ‒ Severely negative EBIT was turned clearly positive in 2010 EBIT, excl. non-rec. items m€ ‒ Profitability reached the level of main competitors in 2010 200 ‒ The year 2011 was disappointing 173 100 ‒ Weakening of the market situation in 2H 74 59 0 ‒ Negative impacts of the measures to eliminate paper business losses 2009 2010 2011 2012 -100 -150 ‒ Results increased steadily in 2012 and in total improved from 2011 -200 6 Metsä Board Metsä Group
Metsä Board Is in Good Speed towards Super Productivity 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 2013E Year end 7 Metsä Board Metsä Group
Packaging Material Business Is One of the Biggest Businesses in the World Global packaging market (~€530 Billion) ‒ Demand for Good packaging is heavily increasing ‒ Good packaging is ‒ Ecological ‒ Safe ‒ Efficient marketing and communication tool Wood fibre ‒ Economical based materials Others 36 % 64 % Wood fibre the best raw material for Good packaging Sources: Pira & Metsä Board Metsä Board 8 Metsä Group
Our Focus is on Good Packaging – Fresh Forest Fibre Cartonboard Business ‒ Fresh forest fibre paperboard the most environmentally sound packaging material ‒ Wood fibre based products replace non-renewable materials like plastic and aluminium ‒ In the food segment fresh forest fibre paperboard replaces also recycled fibre based packaging materials Metsä Board 9 Metsä Group
Metsä Board’s New Generation Light-Weight Cartonboards Meet Metsä Board’s Success is Based on Ecological Cartonboard that Growing Demand from Consumer Goods Brand Owners Very Well Is up to 30% Lighter than Competitors Metsä Board’s innovative folding boxboards are up to 30% lighter than competitors’ products Up to 30% Lighter than Competitors’ Products Metsä Board’s White lined folding boxboard chipboard Typical (WLC) folding boxboard Solid bleached (FBB) Board (SBS) Six million cartons for biscuits = 19 000 m 2 of board 10 Metsä Board Metsä Group
Successful Strategy in Paperboard Business ‒ Focus on lightweight fresh forest fibre products and the brand owner customer segment EBIT, excl. non-recurring items, % of sales ‒ Securing healthy price level as the market leader ‒ Productivity improved 50% from 2006 by increasing production and reducing heavily fixed costs ‒ Strategy has been successful ‒ European market share increased by more than 5%-points ‒ Prices increased by over 20% ‒ Profitability improved to best in class level 11 Metsä Board Metsä Group
Good Potential to Increase Paperboard Capacity with Smart Investments ‒ FBB capacity increased from 785 000 to 935 000 t/a ‒ New capacity fully available from early 2013 ‒ Dedication of the kraftliner business to coated grades has been a great success ‒ Kemi mill’s target is to increase capacity from 375 000 to 400 000 t/a without capex ‒ Good potential to further increase current FBB machines’ capacity with Smart Investments New capacity is needed in high-quality FBB and kraftliner segments to fulfil customers’ growing demand 12 Metsä Board Metsä Group
Metsä Board’s Lightweight Folding Boxboard Has Excellent Growth Potential Globally ‒ Global cartonboard demand growth 3-4 %/a Share of ecological FBB of total cartonboard market still low in all continents ‒ Excellent way for consumer goods companies to improve sustainability is to replace traditional packages with Metsä Board’s safe and ecological FBB Europe 34% North America 4% Asia 22% ‒ Metsä Board is further strengthening its market position in Europe, North America and Asia ‒ Threshold for new producers to enter high performance FBB segment is very high 13 Metsä Board Metsä Group
High Threshold for New Producers to Enter High Performance FBB Segment ‒ High quality fresh forest fibres are a must ‒ Very difficult for newcomers to establish efficient wood sourcing and processing operations ‒ Most today’s big forest companies have developed their operations for over 100 years ‒ Excellent fibre know-how combined with own state of art chemical, mechanical and BCTMP pulping capacity vital competitive factors ‒ Only a few companies in addition to Metsä Board have full fibre control ‒ Huge multi-product board-making lines not suitable for production of high performance FBB ‒ No room for huge machines in the niche market. Swing machines’ challenge is productivity and quality consistency ‒ Skilled people and long board-making tradition needed to meet high product quality requirements ‒ Main customers are leading consumer goods companies. To be recognized by them as a reliable high performance FBB supplier takes decades 14 Metsä Board Metsä Group
Metsä Board’s Future Was Secured by Massive Re-Engineering of the Paper Operations ‒ In 2006, the successful strategic review of the company’s paper business was started. Our paper capacity then was about 5 million t/a ‒ Closures of 2 million tonnes annual capacity ‒ Divestments worth over 2 b€ incl. ‒ Graphic Papers business for Sappi ‒ Map Merchants for Sequana ‒ New Thames for DS Smith ‒ Material productivity improvement of the remaining paper units 15 Metsä Board Metsä Group
Material Closures Implemented in Recent Years Completed closures in 2007 ‒ Sittingbourne: coated fine paper 210 ktons/a ‒ Gohrsmühle PM6 and PM7: coated fine paper 100 ktons/a ‒ Wifsta: uncoated fine paper 175 ktons/a ‒ Tako BM2: folding boxboard 70 ktons/a Closures in 2008 ‒ Kangas PM2: coated magazine paper 100 ktons/a ‒ Lielahti: BCTMP 105 ktons/a ‒ New Thames: uncoated fine paper (divestment, grade conversion) 230 ktons/a Closures in 2009 ‒ Hallein paper mill: coated fine paper 310 ktons/a ‒ Gohrsmühle: standard coated fine paper (conversion to uncoated fine paper) 250 ktons/a Closures in 2010 ‒ Two machines in Reflex: Speciality paper 80 ktons/a ‒ Alizay pulp mill: Chemical pulp 310 ktons/a ‒ Simpele paper mill: Speciality paper 50 ktons/a Closures in 2011 ‒ Äänekoski paper mill Coated fine paper 190 ktons/a Closures in 2012 ‒ Gohrsmühle’s unprofitable operations: Uncoated fine paper and Speciality paper 190 ktons/a ‒ Alizay paper mill: Uncoated fine paper 310 ktons/a Total paper capacity 2 205 ktons/a Total board capacity 70 ktons/a Total pulp (incl. BCTMP) capacity 415 ktons/a Metsä Board 16 Metsä Group
Measures to Eliminate the Last Losses of Our Paper and Pulp Operations Have Been Successful - Alizay mill closed, assets divested - Gohrsmühle mill’s loss-making operations discontinued - Profitable Chromolux business continues - Cost structure optimized - Restructuring of coated paper business completed - Äänekoski paper mill closed and the reel paper production moved to Husum - Exit from Reflex and Hallein mills completed - Positive annual operating result impact of the above measures is 110 m€ vs. 2011 - Mostly in 2012 and fully from 2013 17 Metsä Board Metsä Group
Cash Flow from Husum and Kaskinen Will Be Maximized - Husum and Kaskinen are the largest units in their fields in Europe - Husum’s paper and pulp capacity maximized to about 1.6 million t/a with no material extra capex - Kaskinen high yield pulp (BCTMP) sales volumes increased and allocated to European long-term contractual customers - Kaskinen mill is a good reserve for Metsä Board to grow its paperboard business in the future 18 Metsä Board Metsä Group
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