Metsä Board Corporation January – March 2019 Results Presentation material 26 April 2019
Q1 2019 in summary • Higher paperboard prices and delivery volumes supported profitability • Good market situation in folding boxboard • Weakened demand in white kraftliners – especially in Europe • Average prices of market pulp declined but delivery volumes picked up from low Q4 • Fewer planned maintenance shutdowns compared to other quarters 2 Q1 2019 Results
Total paperboard delivery volumes in Q1 slightly up from the previous quarter +3% White kraftliner Folding boxboard 500 161 400 1,000 tonnes 1,000 tonnes 173 170 171 149 138 134 152 163 300 200 328 304 302 299 297 297 293 276 265 100 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 -6% 3 Q1 2019 Results
Increased sales with stable operating result Sales Comparable operating result EUR million EUR million and % of sales +6% 80 16% 14,0 % 500 13,4 % 13,1 % 12,7 % 11,4 % 60 12% 400 EUR million EUR million 300 40 8% 200 20 4% 100 492 519 475 458 487 69 59 64 60 62 0 0 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 1 – 12/2018: 1 – 12/2018: EUR 1,944 million EUR 252 million (13.0% of sales ) 4 Q1 2019 Results
Q1 2019 ROCE was 14.4% 16% 14% Target level > 12% 12% 10% 8% 6% 4% 2% 0% Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Comparable ROCE-%, Quarterly 5 Q1 2019 Results
Changes in FX had a positive impact on Q1 results FX impact, including hedges: – Q1 2019 vs Q4 2018: EUR +6 million Annual transaction exposure – Q1 2019 vs Q1 2018: EUR +11 million total EUR 1.3 billion Other currencies GBP 2 % 6 % FX sensitivities excluding hedges 10% strengthening of foreign currency vs. EUR would have an impact on Metsä Board’s EBIT of USD SEK 56 % Currency Next 12 months 36 % USD, $ EUR +70 million SEK, kr EUR -50 million GBP, £ EUR +8 million 6 Q1 2019 Results
Production costs remained high Metsä Board’s cost split in 2018 incl. 24.9% share of Metsä Fibre’s costs • Production costs in Q1 2019 Other – Slightly higher compared to Q4 2018 fixed 14 % – Clearly higher compared to Q1 2018 Wood 28 % • Wood prices increased in 2018 and Personnel remained at a high level in Q1 2019 13 % Energy 14 % Logistics 16 % Chemicals 15 % Total costs in 2018: EUR 1.7 billion (2017: EUR 1.6 billion) 7 Q1 2019 Results
Chinese pulp market shows signs of recovery while European pulp prices continue to decline • Market pulp delivery volumes increased in Pulp price (PIX) development in Europe and China Q1 2019 from the low levels in Q4 2018 … Long-fibre pulp, Europe Long-fibre pulp, China (net) • … but average selling price weakened • Price gap between Europe and China is narrowing as Europe is declining and China has stabilized In the long-term, pulp demand is supported • by • Limited new capacity in the coming years • Restrictions on recycled paper imports in Source: Thomson Reuters Datastream/ Fastmarkets Ltd, Metsä BI China 8 Q1 2019 Results
Metsä Fibre’s dividend supported cash flows in Q1 2019 250 250 200 200 150 150 EUR million EUR million 100 106 100 79 50 68 59 54 43 50 37 36 36 30 30 29 25 26 2 0 23 0 -50 7 -3 -50 -100 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months 9 Q1 2019 Results Free cash flow = cash flow from operations − investments
Net debt decreased and leverage was at 0.9x 600 3,0 Net debt / EBITDA target level: <2.5 500 2,5 2,0 1,9 400 2,0 EUR million 1,7 300 1,5 1,2 1,2 1,1 1,0 1,0 0,9 200 1,0 100 0,5 458 495 437 358 335 388 344 335 297 0 0,0 3/2017 6/2017 9/2017 12/2017 3/2018 6/2018 9/2018 12/2018 3/2019 Net debt, EUR million 10 Q1 2019 Results
Metsä Board renews its folding boxboard portfolio Improved FBB portfolio answers to increasing demands for sustainability, product safety and brand promotion – Further opportunities for lightweighting – Enhanced visual properties – Industry-leading quality consistency – Improved supply security and availability Enabled by our improved high-yield BCTMP. 11 Q1 2019 Results
Near-term outlook • Paperboard delivery volumes in Q2 are expected to stay roughly at the Q1 levels • FBB prices are expected to be stable • Weakened demand in kraftliners may have an impact on the average sales price • Global pulp demand is expected to be stable • Neutral impact from FX and production costs in Q2 vs. Q1 • Several maintenance shutdowns in Finnish mills during April – June 12 Q1 2019 Results
Result guidance for April – June 2019 Metsä Board’s comparable operating result in the second quarter of 2019 is expected to weaken compared to the first quarter of 2019. 13 Q1 2019 Results
Metsä Board and Metsä Fibre to launch pre-engineering phases for three major investments The total size of the investments amounts to approximately EUR 2 billion Metsä Board: Husum Metsä Fibre: Kemi Metsä Fibre: Rauma Renewal of the pulp mill New bioproduct mill New pine sawmill line Metsä Board owns 24.9% of Metsä Fibre
The aim is to further improve the competitiveness of pulp and energy production and move towards fossil-free production
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. 16 Q1 2019 Results
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 study on the phase: 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 During the 2020’s Second phase: Current two fibre lines in Husum pulp mill to be replaced by one new fibre line 17 Q1 2019 Results
Metsä Fibre is planning two major investments New bioproduct mill * in Kemi, Finland • Size of the investment EUR 1.5 billion • Annual capacity 1.5 million tonnes of chemical pulp and several other bioproducts Final investment decision expected in the summer of 2020 • New sawmill line in Rauma, Finland • Size of the investment EUR 200 million • Annual capacity 750,000 cubic meters • If realised, would be the most modern and efficient sawmill line in the world • Final investment decision in the beginning of 2020 *) would replace the existing pulp mill in Kemi, with 18 Q1 2019 Results annual capacity of 630,000 tonnes of chemical pulp
Our long-term financial targets aim for profitability and a strong balance sheet Comparable ROCE: Net debt/comparable EBITDA: Dividend policy: At least 12% Maximum level 2.5x Payout ratio at least 50% of net result 76 < 2.5x 57 14,4 2,0 51 50 1,8 11,3 44 11,2 > 50% > 12% 9,1 1,2 8,1 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 19 19 Q1 2019 Results
Summary • Good market situation in FBB but weakening demand in WKL • Global pulp market is recovering, but still uncertain in the short term • Enhanced position in premium lightweight paperboards through improved product portfolio • Metsä Board and Metsä Fibre have announced major capex plans • Profitability guides our future growth 20 Q1 2019 Results
Appendix
Key financials Change Change Q1/19 Q4/18 Q4/18 Q1/18 Q1/19 FY 2018 vs. Q3/18 vs. Q1/18 Sales EUR, m 487 458 +6% 492 -1% 1,944 EBITDA* 89 81 +10% 94 -5% 344 EUR, m Operating result* 62 60 +3% 69 -10% 252 EUR, m % of sales* % 12.7 13.1 14.0 13.0 Result before taxes* 58 56 +4% 61 -5% 230 EUR, m Earnings per share EUR 0.17 0.14 +21% 0.15 +13% 0.57 ROCE* % 14.4 13.7 15.8 14.4 Capex 6 34 -81% 10 -38% 70 EUR, m Cash flow from operations EUR, m 36 30 +20% 30 +20% 151 IB Net debt, at end of period 297 335 -11% 335 -11% 335 EUR, m 22 Q1 2019 Results *comparable
Paperboard delivery volumes in Q1 2019 vs. Q1 2018 Folding boxboard (FBB) deliveries in Q1 2019 (Q1 2018) White kraftliner (WKL) deliveries in Q1 2019 (Q1 2018) 1,000 tonnes 1,000 tonnes APAC ↓ 23k (31) Americas Americas 8% (48) ↑ 49k EMEA 65k ↑ 89k (60) ↓ 35% EMEA (121) 22% ↑ 214k 65% (205) 71% Total WKL deliveries Total FBB deliveries 138,000 tonnes (Q1 18: 171,000) 302,000 tonnes (Q1 18: 297,000) 23 Q1 2019 Results
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