Investor presentation January March 2019 Contents This is Mets - PowerPoint PPT Presentation

Metsä Board Corporation Investor presentation January – March 2019

Contents This is Metsä Board ………………………… 3 Q1 2019 Results ………………………….. 31 Planned investments ……………………….. 14 Sustainability ………………………………. 45 Profitability drivers ………………………….. 19 R&D ………………………………………… 58 Operating environment …………………….. 26 Owners, management, contacts ……….... 68 Investor presentation 2 1 – 3/2019

Metsä Board in brief Sales split by product Year 2018: Sales EUR 1.9bn, comparable operating result EUR 252m, Market ROCE 14.4%, Capex EUR 70m, Personnel 2,352 Folding pulp boxboard 18 % 56 % Total paperboard capacity FY 2018: 8 2Mt/a EUR 1,944m White production units Net pulp balance kraftlainer in Finland and Sweden +600,000t/a 26 % Sales split by region MAIN CUSTOMERS STRONG MARKET POSITION Brand-owners, converters, merchants #1 in folding boxboard and white kraftliner in Europe APAC 8 % and manufactures of corrugated products #1 in coated white kraftliner globally Largest European importer of folding boxboard to US TOP10 customers: ~25% of sales Largest customer: <5% of sales Americas EMEA FY 2018: 19 % 74 % EUR 1,944m METSÄ BOARD IS PART OF METSÄ GROUP Metsä Board owns 24.9% of its associated company Metsä Fibre Metsäliitto Cooperative, owned by 104,000 Finnish forest owners, holds 42% of Metsä Board’s shares and 61% of votes Investor presentation 3 1 – 3/2019

Metsä Board is focused on premium fresh fibre paperboards with various end-uses Folding boxboards Food service boards White kraftliners Packaging solutions for E-commerce, retail-ready Solutions for food service consumer goods tray and point-of-sale solutions

Our fresh fibre paperboards offer solutions for global trends GLOBALISATION AND SUSTAINABILITY FOOD SAFETY E-COMMERCE URBANISATION We use only We have good Our paperboards We offer recyclable renewable fresh control of raw offer a strong products that are fibres from materials, which promotion and ideal for the sustainably guarantees purity branding circular economy managed northern and safety in food experience forests contact uses

We have a leading position in Europe in our main products White kraftliner Folding boxboard • Regional sales split of in Europe in Europe paperboard deliveries: Total capacity 2.1m tonnes Total capacity 3.8m tonnes • 70% EMEA • 23% Americas Metsä Others Metsä Others • 7% APAC Board Board #5 #1 #1 • In APAC we focus on high- 32 % 35 % quality FBB segment #5 #4 We are the largest European • #4 importer of FBB to US #3 • We are #1 in coated white #3 #2 #2 kraftliners globally Investor presentation 6 1 – 3/2019

Our production is close to our main raw material Our net balance in pulp in 2019, Total paperboard capacity : including the 24.9% ownership in Folding boxboard (FBB): 1,345,000 t/a In 2018, Metsä Board sourced 5.5 million m 3 wood : Metsä Fibre, is 600,000 t/a White kraftliner (WKL): 675,000 t/a Sweden (37%), Finland (28%), Baltics (20%) and Russia (15%). Kemi Äänekoski 425,000 t/a WKL 255,000 t/a FBB 610,000 t/a Pulp * 1.3 million t/a Pulp* Husum, SWE Simpele 400,000 t/a FBB 290,000 t/a FBB 250,000 t/a WKL 730,000 t/a Pulp Joutseno Kaskinen 330,000 t/a BCTMP 370,000 t/a BCTMP 690,000 t/a Pulp* Kyro Tako 190,000 t/a FBB 210,000 t/a FBB * Metsä Fibre mill Investor presentation 7 1 – 3/2019

Metsä Board is part of Metsä Group • The Group structure enables high availability of northern wood Consistent quality of fibres that are tailor-made for the end products • • Metsä Group’s ( Metsäliitto Cooperative) holding in Metsä Board: 41% of shares and 62% of votes METSÄ GROUP │ FY2018: Sales EUR 5.7bn, ROCE 16.6%, Personnel 9,500 │ METSÄLIITTO COOPERATIVE Group’s parent company, owned by 104,000 Finnish forest owners 100% 50%* 41% Metsä Group’s holding: 100% 100% METSÄ METSÄ METSÄ METSÄ METSÄ FOREST FIBRE WOOD BOARD TISSUE Wood supply and Pulp and sawn Wood products Paperboard Tissue and forest services timber cooking papers * Itotchu Corporation’s METSÄ BOARD’S holding is 25% HOLDING 24.9% Through Metsä Fibre’s ownership Metsä Board’s annual net pulp balance is 600,000 tonnes Investor presentation 8 1 – 3/2019

We have been growing well above average market growth rate during past years … Metsä Board’s annual paperboard deliveries, CAGR 2013– 2018: 10% 2 000 1 500 Annual global 1,000 tonnes demand growth for 1 000 folding boxboard and white kraftliner has been roughly 3% 500 0 2013 2014 2015 2016 2017 2018 White kraftliner Folding boxboard Source: Metsä Board´s own research Investor presentation 1 – 3/2019

… driven by paperboard capacity increases Investments in growth 2011 – 2018: Capital expenditure and depreciation 2018 New baling line in Kaskinen BCTMP mill: 180 30,000 new BCTMP capacity 150 New sheeting line in Äänekoski (to be in EUR million production 9/2019) 120 2017 New extrusion coating line in Husum: 90 100,000 t/a PE coating capacity 60 2015 – 16 New folding boxboard production line in Husum: 400,000 t/a of FBB and linerboard 30 production line conversion: 250,000 t/a of WKL 0 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2011 – 12 Debottlenecking in Simpele, Äänekoski and Kyro mills: total 150,000 t/a of FBB Maintenance capex Growth capex Depreciation Note! 2019E Capex does not include the planned investments announced on 26 April 2019 Investor presentation 10 1 – 3/2019

Now our core is on profitability Our financial targets: Net debt/comparable EBITDA: Dividend policy: Comparable ROCE: At least 12% Maximum level 2.5x Payout ratio at least 50% of net result 76 < 2.5x 57 14,4 2,0 51 1,8 50 11,3 11,2 44 > 50% > 12% 9,1 8,1 1,2 1,2 1,0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Actual in Q1 2019: 14.4% Actual in 31 March 2019: 0.9x Investor presentation 11 11 1 – 3/2019

CAGR in dividend +30% in 2012 – 2018 Dividend, EUR and payout ratio, % Enterprise value, EUR million 0,30 100% 3500 3000 0,25 75% 2500 0,20 2000 0,15 50% 1500 0,10 1000 25% 0,05 500 0,00 0% 0 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 3/2019 Dividend, EUR Dividend/EPS, % Net debt Market capitalization, EUR million Note! Year 2018 total distribution consists of a dividend of EUR 0.10 and other distribution of equity of EUR 0.19 per share Investor presentation 12 1 – 3/2019

Capital allocation in 2019 Free cash flow in EUR million and % of EBITDA • Free cash flow – Since 2016 improved FCF as a result of improved EUR million % profitability, decreased capex and good working 200 80 Comparable capital discipline EBITDA Q1 2019 EUR 339 million 150 60 – Q1 2019 FCF supported by dividend received from Metsä Fibre but weakened by increased inventories 100 40 and trade receivables • Our capital allocation for 2019 50 20 – EUR 103 million dividend paid in April 0 0 – Approximately EUR 100 million to reduce debt -50 -20 – CAPEX: return-based allocation (ROCE above 12%), ongoing pre-engineering phase regarding the -100 -40 renewal of Husum pulp mill 2013 2014 2015 2016 2017 2018 Q1 2019 FCF=Cash flow from operations after investments FCF, EUR million FCF/EBITDA,% Investor presentation 13 1 – 3/2019

Investment plans by Metsä Board and Metsä Fibre

Metsä Board and Metsä Fibre are planning three major investments with total value of EUR 2 billion The aim is to further improve the competitiveness of pulp and energy production and move towards fossil-free production Metsä Board: Husum Metsä Fibre: Kemi Metsä Fibre: Rauma Renewal of the pulp mill New bioproduct mill New pine sawmill line EUR ~300 million EUR ~1.5 billion EUR ~200 million Metsä Board owns 24.9% of Metsä Fibre

Investment in Husum pulp mill would enable the long-term development of the integrate First phase : Investments in a new recovery boiler and a new turbine benefit the whole Husum integrate – Reduced energy costs, improved reliability of production and decreased duration of maintenance – Self-sufficiency in electricity would increase to over 80%, and be entirely based on renewable biomass Second phase : Replacing the old fibre lines with one new fibre line Cost efficient, long-term energy production solution will create a solid foundation to increase paperboard capacity in the future. Investor presentation 16 1 – 3/2019

Estimated time schedule for the renewal in Husum mill Final investment New First decision Roughly 24 months after the investment decision recovery Prefeasibility expected boiler and phase: study on the to be made in turbine in renewal Q4 2019, at operation concluded the earliest 2019 2020 2021 2022 The size of the first phase investment is approximately EUR 300 million, divided between the years 2019 – 2022 Total annual production capacity of the pulp mill after the investment will remain at 750,000 tonnes Second During the 2020’s phase: Current two fibre lines in Husum pulp mill to be replaced by one new fibre line Investor presentation 17 1 – 3/2019