Metsä Board Investor presentation 1 – 6/2018 2 August 2018
Contents This is Metsä Board 3 Strategy and financial targets 14 Operating environment and market position 21 Growth in the paperboard business 32 2018 Half-Year Financial Report 38 Credit update 51 Production, capacities and sourcing 57 Product development focus areas 65 Sustainability 71 Appendix 77 Contact information 83 Investor presentation 2 1 – 6/2018
This is Metsä Board
Sales split in H1 2018 Investment highlights Market pulp 19% Folding • A pure-play paperboard company focused on premium fresh White boxboard kraftliners 55% fibre paperboards 26% • Strong market position: – #1 in folding boxboard and white kraftliners in Europe – #1 in coated white kraftliners globally Sales split by region in H1 2018 • 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 72 % 8 100 production units in countries Finland and Sweden Investor presentation 4 1 – 6/2018
Increased shareholder value and steadily growing dividend Enterprise value , € million Dividend , € and payout ratio, % EUR mill. EUR 4000 0,24 90% 3500 0,20 75% 3000 0,16 60% 2500 2000 0,12 45% 1500 0,08 30% 1000 0,04 15% 500 0 0,00 0% 2010 2011 2012 2013 2014 2015 2016 2017 6/18 2012 2013 2014 2015 2016 2017 Market capitalization, EUR million Dividend, EUR Dividend/EPS, % Net debt, EUR million Investor presentation 5 1 – 6/2018
Metsä Board’s growth has clearly exceeded the average market growth * * Annual global demand growth for folding boxboard and Metsä Board’s paperboard deliveries white kraftliners is estimated to be 1,000 tonnes 3 – 4% 2 000 Source: Metsä Board´s own 1 500 research 1 000 500 0 2013 2014 2015 2016 2017 H1 2018 White kraftliner Folding boxboard Investor presentation 6 1 – 6/2018
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
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 – 6/2018
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 9 1 – 6/2018
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 10 1 – 6/2018
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 11 1 – 6/2018
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 12 1 – 6/2018
Potential to improve profitability of Husum At least EUR 100 million EBIT improvement from 2016 to 2019 120,000 FBB capacity Restructuring : tonnes utilisation 2016 2019 Efficiency of pulp rate >95% improvement production with normal programme lost in 2016 sales price* €25 million €5 million €70 million * The sales price improvement in Euros is currently being delayed by the weakened US dollar Investor presentation 13 1 – 6/2018
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 15 1 – 6/2018
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 16 1 – 6/2018
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 17 1 – 6/2018
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 18 1 – 6/2018
Financial targets and actuals Net debt / Annual growth in total Comparable ROCE, % comparable EBITDA, % paperboard deliveries, % 15,1 Target: <2.5 15% Target: >12% 2,0 11,3 11,2 13% 1,8 12% 9,1 10% 8,1 Target is to 1,2 1,2 1,2 exceed 6% relevant market growth, 3-4%/a 2014 2015 2016 2017 H1/18 2014 2015 2016 2017 H1/18 2014 2015 2016 2017 H1/18 Dividend policy: Metsä Board aims to distribute at least 50% of its result for the financial period in annual dividends to its shareholders Investor presentation 19 19 1 – 6/2018
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 20 1 – 6/2018
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 22 1 – 6/2018
Fresh fibre paperboards offer solutions to major challenges Replacing fossil- Increased waste Reducing carbon Consumer based materials, generation due to footprint expectations on i.e. plastics urbanisation The solution: safer products The solution: The solution: bio-based fuels, – especially in renewable and circular economy lower production food packaging biodegradable and bio-based emissions and The solution: wood fibre packaging lighter pure and safe paperboards fresh fibres
The total packaging market is $850 billion, of which paperboard packaging is roughly one third 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 24 1 – 6/2018 Source: Smithers Pira
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