Metsä Board Investor presentation 1 – 3/2018 3 May 2018
Contents Investment highlights 3 Strategy and financial targets 15 Operating environment and market position 23 Growth in the paperboard business 32 Results for Q1 2018 39 Credit update 50 Production, capacities and sourcing 56 Product development focus areas 63 Sustainability 69 Shares and owners 75 Appendix 78 Contact information 86 Investor presentation 2 1 – 3/2018
Investment highlights
Sales split in 2017 Others Investment highlights 3% Market pulp 18% Folding • A pure-play paperboard company focused on premium fresh boxboard White 53% fibre paperboards kraftliners 27% • Strong market position: – #1 in folding boxboard and white kraftliners in Europe – #1 in coated white kraftliners globally Sales split by region in 2017 • Global megatrends – population growth, urbanization and APAC sustainability – are driving the demand for ecological packacing 9 % Americas • A growth company with good profitability 19 % • Self-sufficiency in pulp EMEA Global sales to over 100 72 % countries from 8 production units in Finland and Sweden Investor presentation 4 1 – 3/2018
Increased shareholder value and steadily growing dividend Enterprise value, EUR million Dividend and payout ratio % EUR mill. EUR 3000 0,24 90% 2500 0,20 75% 2000 0,16 60% 1500 0,12 45% 1000 0,08 30% 500 0,04 15% 0 0,00 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Dividend, EUR Dividend/EPS, % Net debt Market capitalization Investor presentation 5 1 – 3/2018
Metsä Board’s lightweight premium paperboards Folding boxboards Food service boards White kraftliners Packaging solutions for Retail-ready tray and Solutions for food service consumer goods point-of-sale solutions
Metsä Board has a broad customer base Roughly 50% of Metsä Board’s folding boxboard sales in Europe is negotiated directly with brand owners BRAND OWNERS CONVERTERS CORRUGATED BOX MANUFACTURERS MERCHANTS FOLDING BOXBOARD WHITE LINERBOARDS Investor presentation 7 1 – 3/2018
Customers benefit from Metsä Board’s paperboards Lightweightness – Metsä Board’s folding boxboard can be up to 30% lighter compared to competing grades Purity and product safety – Fresh fibre paperboards do not include harmful substances which could be absorbed into foodstuff in food and food service packaging Sustainability – Major part of the energy the company uses is renewable and the wood used as raw material is fully traceable Quality – Only high-quality paperboards Investor presentation 8 1 – 3/2018
Three-layer structure makes the board light while maintaining the stiffness Metsä Board’s folding boxboards are produced from BCTMP or mechanical pulp, which is used in the middle layer (3) to make the board bulky and light. The two outer fibre layers (2 and 4) are made of chemical pulp, which maximizes the strength of the board. Coating layers (1) can be one or several and on top or both sides. Investor presentation 9 1 – 3/2018
Strong profitability development Comparable ROCE-% Comparable EBIT-% 15,8 16 16 16 14,0 14 14 14 11,3 11,2 Target over 12% 12 12 12 10,5 9,1 10 9,0 10 10 8,1 8,0 8 8 8 % % 6,8 6 6 6 4 4 4 2 2 2 0 0 0 2014 2015 2016 2017 Q1/2018 2014 2015 2016 2017 Q1/2018 Year 2016 profitability was burdened by the ramp-up of Husum’s folding boxboard machine Investor presentation 10 1 – 3/2018
Potential to improve profitability of Husum At least EUR 100 million EBIT improvement from 2016 to 2019 120,000 FBB capacity Restructuring : tonnes utilisation rate 2016 2019 Efficiency of pulp >95% with improvement production normal sales programme lost in 2016 price* + EUR + EUR + EUR 25 million 5 million >70 million * The sales price improvement in Euros is currently being delayed by the weakened US dollar. Investor presentation 11 1 – 3/2018
Improvement in productivity over time Production capacity tn / Personnel at Production capacity (tonnes) / employee at current mills employee current mills 2 200 2 200 2 000 1 900 1 800 1 600 1 600 1 400 1 300 1 200 1 000 1 000 2010 2011 2012 2013 2014 2015 2016 2017 2018E Production capacity tn/employee Personnel at current mills Investor presentation 12 1 – 3/2018
Estimated capex for 2018 is EUR 70 million EUR million 180 150 120 90 60 30 0 2010 2011 2012 2013 2014 2015 2016 2017 2018E Maintenance capex Growth capex Depreciation Main growth in capex in 2015−2016: Husum investment programme, extrusion coating line and equity investment in Metsä Fibre’s bioproduct mill Investor presentation 13 1 – 3/2018
High threshold for new producers to enter high-quality paperboard segment • High investment costs • Limited availability of high yield pulp ( BCTMP) • Global brand owners and manufacturers for corrugated products not willing to change paperboard suppliers easily in the high-quality segments – High speed packaging lines very quality sensitive – Requirements for unified brand look and feel globally – Sustainability and product safety aspects • Skilled people and organizations a crucial success factor Investor presentation 14 1 – 3/2018
Strategy 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 Investor presentation 16 1 – 3/2018
Strategic cornerstones 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 Investor presentation 17 1 – 3/2018
Strategic cornerstones 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 Investor presentation 18 1 – 3/2018
Strategic cornerstones 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 Investor presentation 19 1 – 3/2018
Financial targets and actuals in 2017 Annual growth in paperboard Comparable ROCE, % Net debt / deliveries, % comparable EBITDA, % Target: >12% 11.2 15% 11.3 2.9 12% 13% 9.1 Target: <2.5 8.1 10% 2.0 1.8 6.4 7% 1.2 1.2 Target is to grow over the average 3-4% market growth 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Dividend policy: Target is to distribute at least 50% of the result for the financial period Investor presentation 20 20 1 – 3/2018
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 Investor presentation 21 1 – 3/2018
Dividend and EPS EPS and DPS, EUR • Metsä Board’s dividend payout target 0,50 is at least 50 per cent of the result for 0,40 the financial period 0,30 • Dividend for 2017: 0,20 – EUR 0.21 per share 0,10 – Totalling EUR 75 million – Corresponds to 50 per cent of EPS 0,00 2013 2014 2015 2016 2017 Earnings per share Dividend per share Investor presentation 22 1 – 3/2018
Operating environment and market position
Global trends driving growth in sustainably packaging • Urbanization • Growing consumption • Stronger demand for ecological packaging • Greater significance of resource efficiency • Increasing regulation • Social responsibility throughout the value chain Investor presentation 24 1 – 3/2018
The global paperboard packaging market is about USD 300 billion The total packaging market is USD 850 billion Average annual growth rate of paperboard packaging USD bn 400 + 3% per year 2017-2022 350 300 USD 250 300 bn 200 150 100 Paperboard packaging 50 Other wood fibre based packaging 0 Non-fibre based packaging 2012 2013 2014 2015 2016 2017 2022F Investor presentation 25 1 – 3/2018 Source: Smithers Pira
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