Metsä Board Interim report January – September 2019 31 October 2019
Q3 in summary • Favourable development in paperboard business Higher paperboard volumes, stable price – levels and lower costs compared to Q2 2019 • Market pulp prices continued to decline with a negative impact on the result • Planned maintenance shutdowns in Kemi and Husum integrates Announced after the review period on 30 October: Planned renewal of Metsä Board’s Husum pulp mill proceeds. Metsä Board to make financial commitments prior to the final investment decision Interim Report Jan-Sep 2 2019
Ambitious sustainability targets for 2030 Highlights of the new targets: • Fossil-free mills by 2030 with zero fossil CO 2 emissions, from both – our own energy production (scope 1) – all purchased energy (scope 2) • Fossil-free raw materials • 30% reduction in process water use per product tonne and at least 10% improvement in energy efficiency More information and all targets at Interim Report Jan-Sep www.metsaboard.com/sustainability 3 2019
New plastic-free barrier board for even more demanding end-uses Metsä Board has developed a new plastic-free eco-barrier paperboard for food and food service purposes Medium barrier for grease and moisture Can be recycled in paper or paperboard streams END-USES: Food service, fresh, dry and frozen food and other packaging end-uses that require barrier properties Interim Report Jan-Sep 4 2019
Higher kraftliner volumes pushed total paperboard deliveries up in Q3 +4% White kraftliner Folding boxboard +5% 500 466 447 445 161 400 173 170 161 171 149 138 146 134 152 163 1,000 tonnes 1,000 tonnes 300 200 328 304 302 305 299 297 297 299 293 276 265 100 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q1-Q3 2018 total: Q1-Q3 2019 total: 1,405k tonnes 1,352k tonnes Interim Report Jan-Sep -4% 5 2019
Year-to-date paperboard deliveries by grade Biggest deviations in WKL in EMEA and FBB in APAC Folding boxboard (FBB) deliveries in tonnes White kraftliner (WKL) deliveries in tonnes January – September 2019 (1 – 9/2018) January – September 2019 (1 – 9/2018) APAC APAC 77,000 7,000 (3k) (92k) 2% Americas 9% 147,000 EMEA Americas (134k) 290,000 185,000 33% EMEA (344k) (192k) 20% 645,000 65% (637k) 71% Total WKL deliveries Total FBB deliveries 1 – 9/2019: 445,000 tonnes 1 – 9/2019: 907,000 tonnes (1 – 9/2018: 481,000) (1 – 9/2018: 922,000) Interim Report Jan-Sep 6 2019
January – September 2019 (1-9/2018) Sales were roughly at the same level but operating result weakened Sales Comparable operating result EUR million EUR million and % of sales 2000 300 15,0 13.0% 12.9% 1600 240 12,0 10.5% 1,486 1,453 10.0% 192 Operating 475 EUR million EUR million 8.0% 1200 489 180 9,0 Q3 result, 64 145 % of sales: 800 120 43 Q3 6,0 519 477 Q2 59 Q3/19: 8.7% 41 Q2 Q2/19: 8.6% 400 60 3,0 Q1/19: 12.7% 492 Q1 487 69 62 Q1 0 0 0,0 2016 2017 2018 Q1 – Q3 Q1 – Q3 2016 2017 2018 Q1 – Q3 Q1 – Q3 2018 2019 2018 2019 Interim Report Jan-Sep 7 2019
Year-to-date result was supported by higher paperboard prices and FX, negative from pulp and production costs Comparable operating result Comparable operating result Jan-Sep 2019 vs. Jan – Sep 2018 Q3 2019 vs. Q2 2019 Q1 – Q3 2018: EUR 145 million (EUR 192 million) Q3 2019: EUR 43 million (EUR 41 million) Positive: Positive: + favourable development in paperboard business + higher prices in FBB and WKL + lower costs + FX + lower depreciation Negative: Negative: - weakened market pulp prices - weakened market pulp prices and volumes - Metsä Fibre’s result share - Metsä Fibre’s result share - more maintenance - higher production costs in paperboard and pulp Interim Report Jan-Sep 8 2019
Market pulp prices in China and Europe have declined throughout the year Pulp price (PIX) development in Europe and China • The PIX price of NBSK has declined by roughly 30% in Europe and by 40% in Long-fibre pulp, Europe Long-fibre pulp, China (net) China from their highest levels in 2018 USD/tonne USD/tonne 1 400 1 400 • Net prices in China and Europe are approaching each other 1 200 1 200 1 000 1 000 • Seasonally higher demand at year end 800 800 • Some producers have announced price 600 600 increases in China 400 400 • Producers’ inventory levels have 200 200 decreased but are are still high 0 0 2013 2014 2015 2016 2017 2018 2019 Source: Fastmarkets Foex Interim Report Jan-Sep 9 Note! The specifications of PIX China Net index were renewed in the beginning of 2017. Earlier data not comparable with new 2019
Year-to-date cash flow from operations EUR 111 million (1 – 9/2018: EUR 121 million) 250 250 200 200 150 150 EUR million EUR million 106 100 100 79 68 59 54 43 44 50 50 36 36 31 30 30 29 26 23 20 13 0 0 -3 -50 -50 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months Interim Report Jan-Sep 10 Free cash flow = cash flow from operations − investments 2019
Net debt at EUR 352 million, leverage 1.2x On 30 September, Metsä Board signed a financing facility with sustainability targets consisting of EUR 150 million term loan and EUR 200 million RCF to replace existing loan (EUR 50 million) and RCF (EUR 150 million) Net debt, EUR million Net debt to comparable EBITDA (last 12 months) 600 3,0 Net debt / EBITDA target level: <2.5 500 2,5 EUR million 400 2,0 1.7 300 1,5 1.2 1.2 1.2 1.2 1.1 1.0 1.0 0.9 200 1,0 100 0,5 437 358 335 388 344 335 297 380 352 0 0,0 9/2017 12/2017 3/2018 6/2018 9/2018 12/2018 3/2019 6/2019 9/2019 Interim Report Jan-Sep 11 2019
Planned renewal of Husum pulp mill
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 Interim Report Jan-Sep new line and take place during the 2020s after the first phase is fully completed 13 2019
Update on planned renewal Announced after the review period on 31 October • Background: On 27 August, Länsstyrelsen decided that the planned new recovery boiler will require an amendment to the environmental permit • Metsä Board aims to minimize the delay caused by the permit process and will make financial commitments up to EUR 100 million * before the final investment decision • Final investment decision will be made after receiving the environmental permit, estimated in Q2 2020, at the earliest *) Included in the total investment value of EUR 320 million Interim Report Jan-Sep 14 2019
Estimated impacts on the first phase of the investment • Self-sufficiency in electricity to increase from the current 40% to over 80%* • Reduced amount of purchased oil • Lower maintenance capex and costs – Extended intervals between planned shutdowns – Reduced duration of the planned shutdowns → Increased pulp and paperboard production • Annual cash flow improvement EUR 35 million, of which EUR 30 million EBITDA improvement and EUR 5 million lower capex • Financing costs to increase EUR 2 million per year *) Annual increase in electricity production about 330 GWh, resulting in cost Interim Report Jan-Sep savings at current electricity prices of approximately EUR 12 million 15 2019
Near-term outlook • Paperboard delivery volumes in Q4 are expected to decline from Q3 levels due to seasonally slower December • Stable price levels for FBB and WKL • Pulp prices remain low globally • Less planned maintenance shutdowns • Stable production costs and FX impacts in Q4 compared to Q3 Interim Report Jan-Sep 16 2019
Result guidance for October – December 2019 Metsä Board’s comparable operating result for the fourth quarter of 2019 is expected to remain roughly at the same level as in the third quarter of 2019 Interim Report Jan-Sep 17 2019
Summary • Q3 slightly better than expected • Market outlook: – Stable market situation for paperboard – Pulp prices remain low • Metsä Board develops packaging materials to replace plastics: New eco-barrier paperboard launched • Financial commitments to be made in Husum pulp mill renewal Interim Report Jan-Sep 18 2019
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