Metsä Board Interim Report 1−9/2017 Presentation material
January – September 2017: Increasing sales and improved operating result Sales Comparable operating result EUR million EUR million and % 500 50 12% 10,5 % 10,2 % 9,2 % 10% 400 40 8,5 % 8,0 % 7,8 % 7,7 % EUR million EUR million 8% 300 30 6% 200 20 4% 100 10 2% 436 423 440 422 445 474 479 35 36 34 33 45 44 50 0 0 0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 1 – 9 2016: 1 – 9 2017: 1 – 9 2016: 1 – 9 2017: +8% EUR 1,299 million EUR 1,397 million +33% EUR 105 million EUR 139 million 2 Interim Report 1-9/2017
Strong growth in paperboard deliveries +17% Q1-Q3 2017 500 Q1-Q3 2016 400 173 170 163 148 148 1,000 tonnes 143 300 142 137 131 141 White fresh fibre linerboard 130 Folding boxboard 200 304 299 266 265 250 245 224 224 227 213 204 100 0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 FY 2015: Q1-Q3 2017: FY 2016: 1,375 tonnes 1,404 tonnes 1,569 tonnes (Q1-Q3/16: 1,181) 3 Interim Report 1-9/2017
Q3 2017 in summary (vs. Q2 2017) • Higher production volumes • Increased average price of folding boxboard • Paperboard deliveries roughly at the level of Q2 • Cash flow from operations strong due to improved result and good working capital performance • Stable or rising market price levels in local currencies – Metsä Board announced price increases in Europe in folding boxboard and white linerboard • Metsä Fibre’s new bioproduct mill started as planned in August 4 Interim Report 1-9/2017
FX exposure and sensitivities • FX rate changes including hedges had a small positive impact in Q3/17 vs. Q2/17 • The positive impact from hedging will start to dilute towards the end of the year • Annual sensitivities have changed due to the changes in FX rates Annual transaction exposure FX sensitivities excluding hedges EUR 1.1 billion 10% strengthening of foreign currency vs. EUR will have an impact on Metsä Board’s EBIT of 6 %2 % USD Currency Next 12 months SEK USD, $ EUR +64 million 58 % 34 % GBP SEK EUR -38 million GBP, £ EUR +7 million Other currencies 5 Interim Report 1-9/2017 Hedging policy: 100% of balance sheet position and 50% of annual net FX flows
Return on capital employed, % 18% 16% 14% Target >12% 12% Q3/17: 10% 11.5% 8% 6% 4% 2% 0% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Comparable ROCE, % 6 Interim Report 1-9/2017
Update on Husum’s folding boxboard • Capacity utilisation rate in July – September 2017 was 76% – FY 2017 estimate is slightly below 75% – Target is to have capacity in full use by the end of 2018 • Annual maintenance shutdown in October • Improved average price of folding boxboard • Production costs per tonne are still higher than at the Finnish mills • Metsä Board’s FBB/FSB deliveries to Americas in 1– 9/2017 up by 65% compared to 1 – 9/2016 • Potential to improve profitability in Husum by EUR 100 million is intact 7 Interim Report 1-9/2017
Cash flows clearly positive Strong cash flow in Q3 due to improved result and good working capital performance 300 256 250 247 250 214 193 186 188 185 200 126 150 115 119 108 118 89 78 100 70 EUR million 98 93 33 50 67 68 66 26 1 59 17 56 55 9 8 -15 49 45 8 7 37 25 0 -22 -22 -72 -50 -76 -91 -100 -82 -95 -150 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months Free cash flow = Net cash flow from operating activities + Investments in intangible and tangible assets + Acquisition of associate company shares + Acquisition of other shares 8 Interim Report 1-9/2017
Stable balance sheet Interest-bearing net debt / 3,0 Net gearing, % comparable EBITDA Financial target: <2.5x 600 0,6 600 2,0 2,1 49% 2,0 2,0 0,5 1,9 45% 44% 44% 44% 2,0 1,7 39% 400 0,4 400 32% 1,2 0,3 1,0 0,2 200 200 0,1 333 464 488 464 458 495 437 333 464 488 464 458 495 437 0 0 0 0,0 2015 2016 9/16 12/16 3/17 6/17 9/17 2015 2016 9/16 12/16 3/17 6/17 9/17 Interest-bearing net debt, EUR million Interest-bearing net debt, EUR million Net gearing, % Interest-bearing net debt / EBITDA (rolling 12-month) 9 Interim Report 1-9/2017
Debt maturity lengthened due to new 10-year bond • Total interest-bearing debt on 30 September was EUR 651 Metsä Board‘s credit ratings million Rating agency Rating and Last update • In September, Metsä Board issued new 10-year EUR 250 million outlook bond with 2.75% annual coupon. At the same time, the company Standard & BB+ (positive) 02/2017 made a tender offer for the old EUR 225 million bond due in Poor‘s 2019 (EUR 158m tendered) Moody‘s Ba1 (stable) 08/2017 • In August, Moody‘s upgraded Metsä Board‘s credit rating from Upgrade from Ba2 Ba2 to Ba1 Interest-bearing debt maturity profile 30.9.2017 250 200 EUR million 150 100 50 0 2017 2018 2019 2020 2021-26 2027 Bonds Loans from financial institutions Pension loans Other loans 10 Interim Report 1-9/2017
Metsä Board’s growth clearly exceeds average market growth Metsä Board’s annual paperboard deliveries 1,000 tonnes 2 000 Annual global 1 800 demand growth for 1 600 folding boxboard and white 1 400 kraftliners is 1 200 estimated to be 1 000 3 – 4% 800 Source: RISI, CEPI, Pöyry 600 and trade statistics among others 400 200 0 2012 2013 2014 2015 2016 LTM* 2018 target Fresh fibre linerboard Folding boxboard 11 Interim Report 1-9/2017 *last twelve months
Metsä Board was again rated among the world’s best performing companies by CDP • Postitions on the CDP Climate A and Water A Lists • Leadership status in CDP Forest programme CDP is a non-profit organization providing a global system to measure, disclose, manage and share vital environmental information. 12 Interim Report 1-9/2017
Metsä Fibre’s new bioproduct mill in Äänekoski has started Start-up as scheduled, costs in budget and production above the ramp-up curve Metsä Board’s annual Total investment Annual pulp capacity Metsä Board invested pulp balance grows by 1.3 million tonnes EUR 24.9 million EUR 1.2 billion 200,000 tonnes* * According to Metsä Board’s 24.9% ownership of Metsä Fibre
Near-term outlook • Metsä Board’s Q4 paperboard delivery volumes are expected to decline due to seasonality • Pulp market is expected to remain in balance. Metsä Fibre’s new bioproduct mill is expected to have positive impact on Metsä Board’s Q4 result • Annual maintenance shutdown in Husum mill will have negative impact on profitability • Positive hedging impact from USD will dilute towards the year-end • Impacts from price increases expected to be visible mainly from Q1 2018 onwards 14 Interim Report 1-9/2017
Profit guidance Mainly due to the maintenance shutdown at the Husum integrated mill, Metsä Board’s comparable operating result in the fourth quarter of 2017 is expected to weaken slightly from the third quarter of 2017. 15 Interim Report 1-9/2017
Summary • Solid performance in Q3 • Good demand for high-quality paperboards, with stable or rising price levels • Near-term focus on improving average price of Husum’s folding boxboard and increasing sales to Americas • Metsä Board expects to have its current paperboard capacity in full use by the end of 2018 16 Interim Report 1-9/2017
Appendix
Key financials Change Change Q3/17 Q2/17 1-9/17 1-9/16 2016 Q3/17 1-9/17 vs. Q2/17 vs. 1-9/16 EUR, m +1% +8% Sales 479 474 1,397 1,299 1,720 EBITDA* EUR, m 75 68 +10% 211 178 +19% 231 Operating result* EUR, m 50 44 +14% 139 105 +32% 138 % of sales % 10.5 9.2 10.0 8.1 8.0 Result before taxes* EUR, m 34 37 -8% 110 84 +31% 107 EUR +22% +67% Earnings per share 0.11 0.09 0.30 0.18 0.25 % ROCE* 11.5 10.3 10.6 8.3 8.1 Capex EUR, m 7 12 -42% 39 119 -67% 162 EUR, m +84% over 100% Cash flow from operations 68 37 130 23 77 IB Net debt, at end of period EUR, m 437 495 -12% 437 488 -10% 464 *comparable 18 Interim Report 1-9/2017
Comparable operating result Q3/17 vs Q2/17: +16% and 1-9/17 vs. 1-9/16: +33% Q3 2017 vs. Q2 2017 1-9 2017 vs. 1-9 2016 139.1 60 50.4 140 43.5 50 104.7 120 40 100 80 30 EBIT-% EBIT-% 60 EBIT-% EBIT-% 20 10.5 10.0 40 8.1 9.2 10 20 0 0 Q2 2017 Q3 2017 1-9 2016 1-9 2017 Positive development in linerboard and market pulp + Inreased average price of FBB, higher production + operations, discontinued paper business, impact from volumes in paperboard and pulp, lower maintenance FX rates including hedges costs, impact from FX rates including hedges Start-up of Metsä Fibre’s new bioproduct mill Increased latex price - - WTKL = white-top kraftliner 19 Interim Report 1-9/2017 FBB = folding boxboard
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