Metsä Board Investor presentation January-September 2016
Contents Investment highlights 3 Strategic cornerstones and financial targets 12 Operating environment and market position 22 Q3/2016 results and outlook 33 Balance sheet and funding 42 Investments 50 Production, capacities and sourcing 57 Sustainability 65 Owners 69 Appendix 72 Contact information 78 2 1-9/2016
Investment highlights
Metsä Board in brief Sales split 2015 • Market leader in folding boxboard in Europe and Paperboard* global market leader in coated white top kraftliner Paper • Strong fibre know-how and self-sufficiency in pulp • Sales in 2015 EUR 2.0 billion and comparable *) Includes market pulp operating result EUR 180 million Sales by region 2015 • 2,600 employees in 23 countries EMEA • Global sales to over 100 countries and eight Americas production units in Finland and Sweden APAC 4 1-9/2016
High-performance packaging materials Folding boxboards, white-top kraftliners and fully bleached linerboards Consumer goods Food service Retail-ready 5 1-9/2016
Folding boxboard is the stiffest yet lightest paperboard grade Benefits of Metsä Board paperboards • Lightweightness – Even 30% lighter than competing grades (e.g. SBB, WLC) • Excellent printability and runnability • Purity and safety Metsä Board’s folding boxboards are • Bioenergy produced from BCTMP or mechanical pulp, which is used in the middle layer (3) – More than 60% of the energy Metsä Board uses comes from to make the board bulky and light. The renewable resources two outer fibre layers (2 and 4) are made of chemical pulp, which maximizes the • Wood from known origin strength of the board. – Fibres used in production are sourced from sustainably managed northern forests 6 1-9/2016
Comparable EBITDA development 283 16% 300 14% 236 14,1 % 250 208 12% 185 11,8 % 200 180 10% EUR million 10,3 % 150 8% 8,8 % 7,2 % 6% 100 4% 50 2% 0% 0 2011 2012 2013 2014 2015 7 1-9/2016
Strong profitability development Comparable ROCE-% Comparable EBIT-% Target over 12% from 2017 11,3 12 10 9,0 10 9,1 8 6,8 8 6 6,4 5,2 6 % % 4,8 3,6 4 3,4 4 2,4 2 2 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 8 1-9/2016
Strong continuing improvement in productivity Production capacity/ employee No. of Production capacity (tonnes) / employee at current mills employees 2000 2 800 1900 Production capacity/employee Number of employees 1800 2 500 1700 2 200 1600 1500 1 900 1400 1 600 1300 1200 1 300 1100 1 000 1000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 9 1-9/2016
Vaihda kuva High threshold for new producers laadukas kartonki to enter high-quality paperboard segment • High investment costs • Limited availability of high yield pulp ( e.g. BCTMP) • Leading global consumer goods companies and corrugated box manufacturers not willing to change paperboard suppliers easily in the high-quality segments – High speed packaging lines very quality sensitive – Requirements for uniform brand look and feel globally – Sustainability and product safety aspects • Skilled people and organizations a crucial success factor 10 1-9/2016
Metsä Board’s paperboard business profitability (EBIT-%) and its’ peers 11 1-9/2016
Strategic cornerstones and financial targets
Metsä Board’s vision is to be the preferred supplier of premium paperboards creating value for customers globally Strategic cornerstones Values • Focus • Responsible profitability Growth Reliability • • • Profitability • Cooperation • Renewal 13 1-9/2016
Focus Focus on premium fresh fibre paperboards for consumer and retail packaging This means to us: • We focus on serving customers whose quality expectations require our high quality, light and strong packaging materials • Our paperboards are produced from fresh fibres • Our products are used for packages at the store and from the store to the consumer 14 1-9/2016
Profitability Profitability is based on superior cost efficiency and healthy sales prices driven by high-quality pulps and unique technical know-how This means to us: • Our superior cost efficiency will be achieved by further developing productivity and efficiency of our mills, operations and people • We will continue to drive down purchasing costs in all areas • Our self-sufficiency in high-quality pulps together with unique paperboard making expertise helps us to improve our market position further and maintain healthy price levels 15 1-9/2016
Growth Grow profitably together with brand owner, converter and merchant customers globally in businesses that benefit from our safe and sustainable paperboards This means to us: • We grow in end-uses where our product is best suited to protecting our customers’ products and promoting their brands and businesses • Our customer base is global, including brand owner, private label, converter and merchant customers • By selecting businesses that benefit from our paperboards we can generate value for our customers and grow profitably with them 16 1-9/2016
Financial targets • Return on capital employed (ROCE) a minimum of 12% from 2017 onwards • Net gearing maximum 70% Comparable ROCE, % Net gearing, % 11,3 106 9,1 72 70 6,4 51 4,8 3,4 32 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 17 1-9/2016
Dividend • Metsä Board’s dividend payout target is at least 1/3 of EPS • Average pay-out ratio during 2012–2015 has been 40% 0,2 0,17 0,18 0,16 0,12 0,14 0,12 0,09 0,1 0,06 0,08 0,06 0,04 0,02 0 2012 2013 2014 2015 18 1-9/2016
Targeted average annual growth rate exceeds clearly the market growth rate 3-5% p.a. Paperboard deliveries 1,000 tonnes 2 000 1 750 1 500 1 250 1 000 750 500 250 0 2011 2012 2013 2014 2015 2018 target Fresh fibre linerboard Folding boxboard 19 1-9/2016
Most important growth area is Americas Actual and targeted deliveries to Americas 300 300 250 250 1,000 tonnes 200 150 100 50 0 2011 2012 2013 2014 2015 2018 target Folding boxboard Fresh fibre linerboard 20 1-9/2016
Main priorities and actions to achieve financial targets • Grow the paperboard businesses profitably globally • Ensure successful sales of new capacity • Secure good price levels • Keep best in class product quality and improve supply chain • Develop new products for existing and new end uses • Continue productivity improvements and cost savings 21 1-9/2016
Operating environment and market position
Demand is based on global trends Globalisation Technology Sustainability Consumption • Increasing role of retail • New innovations • Greater significance of • Growing consumption and harmonisation of utilising wood fibre and resource efficiency and consumers’ global brands other biomaterials drives circular increasing quality economy and life-cycle needs globally • Growing importance of • Continuous thinking logistics development of • Stronger demand for production • Increasing regulation sustainable packaging • Consolidation of carton technologies brings additional converters • Digital services change obligations • Digitisation and purchasing behavior automatisation change • Social responsibility business dynamics through value chain
The global fresh fibre paperboard packaging market is about USD 110 billion The total packaging market is USD 800 billion Estimated average annual growth rate of fresh fibre paperboard is 3–4% USD bn 140 120 100 80 60 40 20 Fresh fibre paperboard Other wood fibre based materials 0 Non-fibre based materials 2013 2014 2015 2018E 24 1-9/2016 Source: Metsä Board estimates
Global folding boxboard market is about 9 Mt/a Total cartonboard market is about 36 Mt/a* North America 6 Mt/a EMEA 8 Mt/a APAC Folding boxboard 20 Mt/a Other fresh fibre grades Recycled grades Lat. Am. 2 Mt/a Avg. growth rate for premium cartonboards is 3–4%/a *) Excluding liquid packaging board, cup & plate stock, liner and uncoated recycled board. 25 1-9/2016 Source: Metsä Board estimates
Global food service board market is 3.5 Mt/a* EMEA 0.9 Mt/a Americas APAC 1.6 Mt/a Cups 1.0 Mt/a Plates Cartons Avg. growth rate for food service board is 3–5%/a *) Base board only, excl. other laminate materials Source: Metsä Board estimates such as aluminium and PE. 26 1-9/2016
Market price development in folding boxboard and white-top kraftliner in Europe EUR/ tn 1100 1000 900 800 700 600 500 2009 2010 2011 2012 2013 2014 2015 2016 Folding boxboard White-top kraftliner Taivekartonki Valkopint ainen kraft laineri Sources: Pöyry Management Consulting ja FOEX Indexes Ltd 27 1-9/2016
Pulp price development (PIX) EUR USD 1050 1050 1000 1000 Softwood, USD 950 950 900 900 850 850 Hardwood, USD 800 800 Softwood, EUR 750 750 700 700 650 650 600 600 Hardwood, EUR 550 550 500 500 450 450 400 400 350 350 '10 '11 '12 '13 '14 '15 '16 Source: Foex Indexes Ltd 28 1-9/2016
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