Metsä Board Investor presentation Q1/2016
Contents Investment highlights 3 Strategic cornerstones and financial targets 12 Operating environment and market position 22 Q1/2016 results and outlook 33 Balance sheet and funding 46 Investments 54 Production, capacities and sourcing 61 Sustainability 69 Owners 73 Appendix 76 Contact information 82 2 Q1 2016
Investment highlights
Metsä Board is market leader in folding boxboard in Europe and global market leader in coated white top kraftliner Sales split 2015 • Main customers are consumer goods companies, converters and merchants Paperboard* • Best-in class profitability and technology leader Paper • Steady cash flow generation and strong balance sheet • Strong fibre know-how and self-sufficiency in pulp *) Includes market pulp Sales by region 2015 • Valuable holdings in Metsä Fibre (24.9%) and Pohjolan Voima (2.6%) EMEA • Global sales to over 100 countries and eight Americas production units in Finland and Sweden APAC 4 Q1 2016
Metsä Board’s CONSUMER RETAIL- FOOD GOODS READY SERVICE customers benefit from high-performance packaging materials Folding boxboard, white top kraftliners and fully bleached linerboard
Metsä Board’s paperboards are examples of 27,7 g successful product development Metsä Board’s folding boxboard • Pure and safe • Superior printing surface • Consistently high quality • Even over 30% lighter in weight than other paperboards Metsä Board’s paperboards offer an excellent way for 30,2 g Average consumer goods companies to improve quality of their folding packages and sustainability of their operations boxboard 35,2 g Solid bleached board 40,8 g Recycled 6 Q1 2016 fibre board
EBITDA development 2011 – 2015 EBITDA, excl. non-recurring items 283 300 16% 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 Q1 2016
Strong profitability development ROCE-%, excl. non-recurring items EBIT-%, excl. non-recurring items 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 Q1 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 Q1 2016
High threshold for new producers to enter high-quality board segment • Limited availability of high quality fibre – Sustainably harvested high quality fresh forest fibres are a must – Own state of art chemical, mechanical and BCTMP pulping capacity vital competitive factors • 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 – High-quality paperboard companies have traditions from several generations 10 Q1 2016
Metsä Board’s paperboard business’ profitability is top of its field in Europe 11 Q1 2016
Strategic cornerstones and financial targets
Metsä Board’s vision is to be the preferred supplier of premium paperboards Values creating value for customers globally Responsible profitability Reliability Strategic cornerstones are Cooperation Renewal • Focus • Growth Profitability • 13 Q1 2016
Focus Focus on premium fresh forest 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 forest fibres • Our products are used for packages at the store and from the store to the consumer 14 Q1 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 Q1 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 Q1 2016
Financial targets • Return on capital employed (ROCE) a minimum of 12% from 2017 onwards • Net gearing not to exceed 70% Minimum ROCE 12%* from 2017 Maximum net gearing 70% 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 Q1 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 Q1 2016
Targeted average annual growth rate exceeds clearly the market growth rate 3-5% p.a. 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 forest fibre linerboard Folding boxboard 19 Q1 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 forest fibre linerboard 20 Q1 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 Q1 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 forest fibre paperboard packaging market is about USD 110 billion The total packaging market is USD 800 billion Estimated average annual growth rate of fresh forest fibre paperboard is 3 – 4% USD bn 140 120 100 80 60 40 20 Fresh forest fibre paperboard Other wood fibre based materials 0 Non-fibre based materials 2013 2014 2015 2018E Source: Metsä Board estimates 24 Q1 2016
Global cartonboard market is about 36 Mt/a * The share of FBB is 9 Mt or 25% of the total market North America 6 Mt/a EMEA 8 Mt/a APAC Folding boxboard 20 Mt/a Other fresh forest fibre grades Recycled grades Avg. growth rate for premium Lat. Am. cartonboards is 2 Mt/a 3 – 4%/a *) Excluding liquid packaging board, cup & plate 25 Q1 2016 Source: Metsä Board estimates stock, liner and uncoated recycled board.
Global food service board market is 3.5 Mt/a* EMEA 0.9 Mt/a Americas APAC Cups 1.6 Mt/a 1.0 Mt/a Plates Avg. growth rate Cartons for food service board is 3 – 5%/a 26 Q1 2016 *) Base board only, excl. other laminate materials such as aluminium and PE. Source: Metsä Board estimates
Market price development in Europe Folding boxboard and white-top kraftliner EUR/tonne 1100 Folding boxboard 1/2009 – 1/2016 1000 900 White-top kraftliner 1/2009 – 1/2016 800 700 600 500 2009 2010 2011 2012 2013 2014 2015 2016 Sources: Pöyry Management consulting, FOEX Indexes Ltd. 27 Q1 2016
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