Metsä Board Corporation Investor presentation January – September 2019
Contents This is Metsä Board ………………………… 3 January- September 2019 Results …….. 32 Planned investments ……………………….. 14 Sustainability ………………………………. 45 Profitability drivers ………………………….. 19 R&D ………………………………………… 56 Operating environment …………………….. 27 Owners, management, contacts ……….... 67 2
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 manufacturers 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 (Metsäliitto Cooperative) Metsä Board owns 24.9% of its associated company Metsä Fibre Metsäliitto Cooperative, owned by 103,000 Finnish forest owners, holds 45% of Metsä Board’s shares and 63% of votes 3
Our focus is on premium fresh fibre paperboards mainly used for consumer goods packaging Total paperboard capacity 2Mt, of which 2/3 folding boxboard and 1/3 white kraftliners Folding boxboards and Food service boards White kraftliners, coated and uncoated Folding boxboard end-uses* White kraftliner end-uses* E-commerce Graphical end-uses Other Food and Food Shelf-ready and consumer Other service Point-of-sale goods (e.g. consumer (food, electronics) goods (e.g. beverages, cosmetics) pharma, cosmetics) *) all data is indicative and based on Metsä Board’s own estimates 4
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 (2018): Total capacity 2.1m tonnes Total capacity 3.8m tonnes • 70% EMEA • 23% Americas Metsä Others Metsä Others • 7% APAC Board Board #5 #1 • In APAC we focus on high- #1 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 6
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 Metsä Fibre, is 600,000 t/a White kraftliner (WKL): 675,000 t/a Wood sourced from Finland, Sweden, Äänekoski Kemi Baltics and Russia. 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 7
We have good control of wood raw materials, from forests to pulp and board production • High availability of Northern wood • Consistent quality of fibres that are tailor-made for the end products METSÄ GROUP METSÄLIITTO COOPERATIVE Group’s parent company, owned by 103,000 Finnish forest owners METSÄ METSÄ METSÄ METSÄ METSÄ FOREST FIBRE WOOD BOARD TISSUE Wood supply and Pulp and sawn Wood products Paperboard Tissue and forest services timber greaseproof papers METSÄ BOARD OWNS 24.9% Through Metsä Fibre’s ownership Metsä Board’s annual net pulp balance is 600,000 tonnes long in 2019 8
We have been growing well above average market growth rate during past years … Metsä Board’s annual paperboard deliveries and current capacity, 1,000 tonnes Total paperboard capacity 2 million tonnes 2 000 2 000 615 1 500 1 500 658 580 1,000 tonnes 539 444 1 000 1 000 373 1215 1144 500 500 988 865 801 763 0 0 2013 2014 2015 2016 2017 2018 White kraftliner deliveries Folding boxboard deliveries Total paperboard capacity * During 2013-2017 the demand growth for FBB and WKL was ~3%/year 9
… driven by paperboard capacity increases Capital expenditure and depreciation Investments in growth 2011 – 2018: 180 2019 New sheeting line in Äänekoski 150 2018 New baling line in Kaskinen BCTMP mill: 120 30,000 new BCTMP capacity EUR million 90 2017 New extrusion coating line in Husum: 100,000 t/a PE coating capacity 60 2015 – 16 New folding boxboard production line in 30 Husum: 400,000 t/a of FBB and linerboard production line conversion: 250,000 t/a of 0 WKL 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2011 – 12 Debottlenecking in Simpele, Äänekoski and Maintenance capex Growth capex Depreciation Kyro mills: total 150,000 t/a of FBB Note! Estimated 2019 capex includes the first instalments related to Husum pulp mill renewal 10
Our long-term financial targets aim for profitability and a strong balance sheet Comparable ROCE: Net debt/comparable EBITDA: Dividend policy: Maximum level 2.5x Payout ratio at least 50% of net result At least 12% 76 < 2.5x 14.4 2.0 50 51 44 11.8 11.3 11.2 > 50% > 12% 8.1 1.2 1.2 1.2 1.0 2015 2016 2017 2018 LTM 2015 2016 2017 2018 2015 2016 2017 2018 LTM LTM = last twelve months 11 11
Our aim is to create the highest possible shareholder value CAGR in dividend +30% Dividend, EUR and payout ratio, % Enterprise value, EUR million in 2012 – 2018 0,30 100% 3500 0,25 3000 75% 0,20 2500 2000 0,15 50% 1500 0,10 25% 1000 0,05 500 0,00 0% 0 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 9/2019 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 12
Capital allocation Free cash flow in EUR million and % of EBITDA Capital allocation for 2019 • EUR million % – EUR 103 million dividend paid in April 200 80 Comparable EBITDA, LTM, – Capex: Estimated EUR 90-100 million, including the EUR 301 million 150 60 first instalments of Husum pulp mill renewal • Estimated impacts on capital allocation from 100 40 Husum pulp mill renewal going forward 50 20 – Capex EUR 320 million in 2019-2022 0 0 • 2020 and 2021 will be the main investment years – capex split to be communicated when the timing of -50 -20 the environmental permit is known -100 -40 – Financing mainly through incremental debt – 2013 2014 2015 2016 2017 2018 LTM cost <1% p.a. and P&L impact EUR 2 million/year from start-up LTM = 10/2018 – 09/2019 FCF, EUR million FCF/EBITDA,% – Dividend policy unchanged FCF=Cash flow from operations after investments 13
Planned investments: Renewal of MetsäBoard Husumpulp mill New bioproduct mill and a sawmill line by MetsäFibre
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 mills Metsä Board: Husum, SWE Metsä Fibre: Kemi, FIN Metsä Fibre: Rauma, FIN Renewal of the pulp mill New bioproduct mill New pine sawmill line EUR 320 million (first phase) EUR ~1.5 billion EUR ~200 million Metsä Board owns 24.9% of Metsä Fibre
Metsä Board is planning to renew its pulp mill in Husum integrate in Sweden The renewal of the pulp mill would: ➢ Create a solid foundation to increase paperboard capacity in the integrate in the future ➢ Secure cost efficient pulp and energy production ➢ Enable the company to reach its ambitious target of fossil-free mills by 2030 The first phase* of the investment Investment value is EUR 320 million, divided over 2019 – 2022 Prefeasibility Final investment Company to apply New recovery boiler and study on the decision expected turbine expected to be in for an renewal to be made in operation, at the earliest environmental concluded permit Q2 2020, at the earliest 2019 2020 2021 2022 * The second phase of the investment would include the replacement the old fibre lines with one new line and take place during the 2020s after the first phase is fully completed 16
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