Metsä Board Interim report January – September 2016
Performance in Q3/2016 • Healthy market situation in fresh fibre paperboards • Growing delivery and production volumes • Fine paper production ended in July and wallpaper base production in September • Solid performance in Finnish mills, Husum impacted profitability negatively • Cash flow from operations was clearly positive 2 Interim report 1-9/2016
Paperboard deliveries grew due to the healthy demand CAGR% in deliveries in 2011 – 2015 has been 9% / year 420 Folding boxboard Fresh fibre linerboard 360 148 Change in paperboard 148 300 deliveries: 142 137 131 141 1,000 tonnes 120 130 111 110 +4% Q3/16 vs.Q2/16 240 +15% Q3/16 vs.Q3/15 180 266 250 120 224 224 227 210 213 204 203 197 60 0 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Note! Figures do not include wallpaper deliveries 3 Interim report 1-9/2016
Sales increased, operating profit negatively impacted by Husum Sales, Comparable operating result EUR million EUR million 600 50 500 40 400 30 300 20 200 10 100 35 37 43 47 55 35 35 36 34 514 499 526 522 498 462 436 423 440 0 0 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 ____________ ____________ ____________ ____________ Q1-Q3/2015: Q1-Q3/2016: Q1-Q3/2015: Q1-Q3/2016: 1,545 M € 1,299 M € 145 M € 105 M € 4 Interim report 1-9/2016
Profitability development Comparable ROCE, % Comparable operating profit of sales, % 14 12 13,0 11,0 Target over 12% from 2017 12 11,3 10 9,0 8,5 10 8,0 9,1 7,7 8 8,5 8,3 8,0 6,8 8 6,4 6 5,2 6 4 4 2 2 0 0 2013 2014 2015 Q3/15 Q1/16 Q2/16 Q3/16 2013 2014 2015 Q3/15 Q1/16 Q2/16 Q3/16 5 Interim report 1-9/2016
Ramp-up phase of folding boxboard machine in Husum is going forward • Delays in deliveries in Q3 due to the – Bottlenecks in the finishing area (Q2/2016) – Leak in the pulp mill’s recovery boiler (Jun-Jul/2016) • Efficiency improvement programme is progressing as planned • Investment programme targets – Full capacity of FBB machine is reached by end of 2016 – Annual EBIT improvement of € 50 million from 2018 onwards • Healthy price level in order intake, but long lead time will postpone positive profit impact 6
Steadily increasing production volumes in Q3 Daily production volumes in Husum’s new FBB machine, tonnes 1400 1200 1000 Q3/2016 tonnes 800 Q2/2016 Q1/2016 600 400 200 0 July August September Production (packed net) 7 days rolling average Monthly/Quarterly average 7 Interim report 1-9/2016
Price level of current order intake in Husum FBB indicates EBIT breakeven with 75% capacity utilization 105 100 Trendlines from weekly data: 95 90 Indexed price development of received orders and invoicing of 85 Husum’s FBB 80 75 70 July August September October 65 60 Received orders € /t Invoicing € /t EBIT breakeven at 75% capacity utilization 8 Interim report 1-9/2016
FX exposure and sensitivities • Total FX impact in Q3 2016 vs.Q2 2016 was slightly positive • Hedging duration of the main foreign currency flows is currently 5-6 months FX exposure by currency Annual FX sensitivities Annual gross amount EUR 1.1 billion to Group EBIT before hedges 10 % strengthening of foreign currency vs. EUR 6 %4 % USD will have an impact on Metsä Board’s EBIT of Currency Next 12 months SEK 58 % USD, $ EUR +60 million 32 % GBP GBP, £ EUR +5 million Other Swedish krona EUR -30 million currencies 9 Interim report 1-9/2016
Decrease in working capital and smaller investments turned the cash flows clearly positive EUR million 300 256 250 247 250 214 198 188 193 200 155 157 150 110 115 118 119 89 100 70 50 46 56 49 51 74 33 9 56 8 93 45 66 8 67 -15 0 -50 -22 -22 -50 -76 -69 -73 -100 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months 10 Interim report 1-9/2016
Positive cash flow decreased net debt 4 Interest-bearing net debt / EBITDA Net gearing, % 600 0,8 600 70% 3 0,7 2.9 0,6 54% 51% 2.1 49% 400 2.1 400 0,5 42% 2 1.8 1.5 0,4 34% 32% 1.2 1.2 0,3 200 200 1 0,2 0,1 597 427 333 344 412 541 488 597 427 333 344 412 541 488 0 0 0 0 2013 2014 2015 9/15 3/16 6/16 9/16 2013 2014 2015 9/15 3/16 6/16 9/16 Interest-bearing net debt, EUR million Interest-bearing net debt, € million Interest-bearing net debt / EBITDA (rolling 12m) Net gearing-% 11 Interim report 1-9/2016
Estimated total capex in 2016 has been revised to € 165 million € million • Estimated total capex in 2016 was revised 180 from € 135 to € 165 million due to a cost overrun in Husum investment programme 150 and changes in capex allocations between 120 years of the extrusion coating line • In Jan – Sep 2016 total capex was € 119 90 million 60 • Main growth capexes in 2016 include Husum investment programme, extrusion 30 coating line and equity investment in Metsä Fibre’s bioproduct mill 0 2010 2011 2012 2013 2014 2015 2016E Capex Growth capex Depreciation 12 Interim report 1-9/2016
Near-term outlook • Positive market situation in fresh fibre paperboard – Stable or increasing market prices • Metsä Board’s paperboard delivery volumes expected to remain stable • Healthy price level in the order intake of Husum’s new FBB, but long lead time postpones the profit impact • Extended annual maintenance shutdown in Husum in Q4 increases costs • Revised estimate for total investments in 2016 is € 165 million 13 Interim report 1-9/2016
Profit guidance for Q4/2016 Metsä Board’s comparable operating result in the fourth quarter of 2016 is expected to remain roughly on the same level as in the third quarter of 2016. 14 Interim report 1-9/2016
Summary • Q3 result was as expected: – Delivery and production volumes increased – Husum still impacted the profitability – Cash flow from operations clearly positive • Fine paper production ended in July and wallpaper base production in September • Stable profit development expected to continue in Finnish mills • Profitability in Husum will improve • Long-term financial targets are unchanged 15 Interim report 1-9/2016
Appendix
Key financials Change Change Q3/16 Q2/16 1-9/16 1-9/15 Q3/16 1-9/16 vs. Q2/16 vs. 1-9/15 € million Sales 440 423 4% 1,299 1,545 -16% € million EBITDA, comparable 59 61 -3% 178 224 -20% % % of sales 13.5 14.4 13.7 14.5 € million Operating result, comparable 34 36 -6% 105 145 -28% % % of sales 7.7 8.5 8.1 9.4 € million Result before taxes, comparable 27 27 84 120 -30% € Earnings per share 0.07 0.07 0.21 0.27 -22% ROCE, comparable % 8.0 8.5 8.3 12.1 € million Gross investments 16 48 -67% 119 117 2% € million Cash flow from operations 67 -22 23 181 -87% 17 Interim report 1-9/2016
Comparable EBITDA 100 18% 16% 16% 14% 14% 14% 80 13% 13% 13% 14% 12% 12% 11% 12% 60 10% 8% 81 40 73 70 6% 62 61 61 60 59 58 52 4% 20 2% 0 0% Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 EBITDA, EUR million EBITDA, % 18 Interim report 1-9/2016
Long-term debt and financial costs Maturity schedule in long-term IB debt Net financial costs ( € million ) and € million average interest rate (%) 300 60 5,5 256 5,2% 250 50 5,0 4,6% 200 173 40 4,5 4,2% 155 150 3,8% 30 4,0 100 3,3% 20 3,5 100 65 10 3,0 34 50 17 47 56 39 32 21 0 2,5 0 2012 2013 2014 2015 Q1-3/2016 2016 2017 2018 2019 2020 2021 >2022 Net financial costs, € million Long-term interest bearing liabilities, € million Average interest rate at the end of period, % Committed undrawn credit facilities, € million 19 Interim report 1-9/2016
Debt structure and liquidity 30 September 2016 Available liquidity, Debt structure, total EUR 367 million total EUR 693 million Bonds 108 Cash and cash Loans from 65 equivalents 222 financial institutions 20 Revolving credit 202 Pension loans facility Unraised pension loans Finance leases and 144 100 other loans 199 Other short-term loans Average maturity of long-term loans at 30 September in 2016 was 2.4 years. 20 Interim report 1-9/2016
Metsä Board 's credit rating Positive BB+ | Ba1 Stable BB | Ba2 Standard & Poor’s Moody’s BB- | Ba3 B+ | B1 B | B2 B- | B3 CCC+ | Caa1 CCC | Caa2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1/2016 21 Interim report 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 Valkopintainen kraftlaineri Sources: Pöyry Management Consulting ja FOEX Indexes Ltd 22 Interim report 1-9/2016
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