Mets Board Investor presentation January December 2018 Contents - PowerPoint PPT Presentation

Metsä Board Investor presentation January – December 2018

Contents Metsä Board in brief 3 Operating environment and demand drivers 15 Main contributors in Metsä Board’s profitability 23 Results: January – September 2018 29 Balance sheet and financing 39 Sustainability and product safety 43 Sustainability guides our R&D work 55 Owners and management 66 Contact information 70 Investor presentation 2 1-9/2018

Investment highlights of Metsä Board Sales split Sales split by product by market area • We are pure-play paperboard company focused on premium fresh fibre APAC Market paperboards Folding 7 % pulp boxboard 18 % 55 % • Global trends, e.g. sustainability and urbanization drive the demand for Americas EMEA FY 2017: FY 2017: 23 % ecological and lightweight packaging 70 % EUR 1,849m EUR 1,849m • We have a strong market position … White kraftlainer • … and good control of wood raw 27 % material and self-sufficiency in pulp Our total paperboard capacity is 2m tonnes/year of which 1/3 are white kraftliners and Investor presentation 2/3 folding boxboard 3 1-9/2018

Our light, pure and safe paperboards have various end- uses… Folding boxboards Food service boards White kraftliners Packaging solutions for Retail-ready tray and Solutions for food service consumer goods point-of-sale solutions

… and we have a broad customer base BRAND OWNERS CONVERTERS CORRUGATED BOX MANUFACTURERS MERCHANTS FOLDING BOXBOARD WHITE KRAFTLINERS Investor presentation 5 1-9/2018

Our fresh fibre paperboards offer solutions for global trends Globalisation & Sustainability Food safety E-commerce urbanisation We use only We have good Our paperboards We offer renewable fresh control of raw offer a strong recyclable fibres from materials, which promotion and products that are sustainably guarantees purity branding ideal for the managed and safety in food experience circular economy northern forests contact uses

We have a leading position in Europe White kraftliner Folding boxboard in Europe in Europe • Our regional sales split: Total capacity 2.1m tonnes Total capacity 3.8m tonnes 70% EMEA 23% Americas 7% APAC Metsä Others Metsä Others Board Board • In APAC we focus on high- #5 quality FBB segment #1 #1 32 % 35 % #5 • We are the largest European #4 importer of FBB to US #4 • We are #1 in coated white kraftliners globally #3 #3 #2 #2 Investor presentation 7 1-9/2018

We have good control of wood raw materials, from forests to pulp and board production • High availability of northern wood • Consistent quality of fibres that are tailor-made for the end products METSÄ GROUP METSÄLIITTO COOPERATIVE Group’s parent company, owned by 104,000 Finnish forest owners METSÄ METSÄ METSÄ METSÄ METSÄ FOREST FIBRE WOOD BOARD TISSUE Wood supply and Pulp and sawn Wood products Paperboard Tissue and forest services timber cooking papers METSÄ BOARD OWNS 24.9% Through Metsä Fibre’s ownership Metsä Board’s annual net pulp balance is Investor presentation 550,000 tonnes long in 2018 8 1-9/2018

Our production is close to our main raw material Our net balance in pulp in 2018, Total paperboard capacity : including the 24.9% ownership in Folding boxboard (FBB): 1.33m t/a Metsä Fibre, is 550,000 t/a White kraftliner (WKL): 690,000 t/a Kemi Äänekoski 420,000 t/a WKL 240,000 t/a FBB 620,000 t/a Pulp * 1.3 million t/a Pulp* Husum, SWE Simpele 400,000 t/a FBB 290,000 t/a FBB 270,000 t/a WKL 730,000 t/a Pulp Joutseno Kaskinen 330,000 t/a BCTMP 370,000 t/a BCTMP 690,000 t/a Pulp Kyro Tako Wood sourced from 190,000 t/a FBB Finland, Sweden, 210,000 t/a FBB Baltics and Russia. * Metsä Fibre mill Investor presentation 9 1-9/2018

Our focused strategy has increased shareholder value CAGR in dividend +30% Dividend, EUR and payout ratio, % in 2012 – 2017 Enterprise value, EUR million 0,25 100% 3500 3000 0,20 80% 2500 0,15 60% 2000 1500 0,10 40% 1000 0,05 20% 500 0,00 0% 0 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 9/18 Dividend, EUR Dividend/EPS, % Market capitalization, EUR million Net debt, EUR million Investor presentation 10 1-9/2018

Our financial targets aim for profitable growth and a strong balance sheet Net debt / Annual growth in total Comparable ROCE, % comparable EBITDA paperboard deliveries, % 14,1 Target <2.5 15% Target >12% 11,3 11,2 2,0 13% 1,8 9,1 12% 8,1 10% 1,2 Target is to 1,2 1,0 exceed 6% relevant market growth, 3%/a 2014 2015 2016 2017 9/2018 2014 2015 2016 2017 LTM 2014 2015 2016 2017 LTM Dividend policy We aim to distribute at least 50% of our result for the financial period in annual dividends Investor presentation 11 11 1-9/2018

We have been growing at a CAGR of 12% – well above average market growth… Metsä Board’s annual paperboard deliveries 2 000 1 500 Annual global 1,000 tonnes demand growth for 1 000 folding boxboard and white kraftliner is estimated to be 3% 500 0 2013 2014 2015 2016 2017 LTM White kraftliner Folding boxboard Source: Metsä Board´s own research 12 Investor presentation 1-9/2018

…driven by capacity increases NEXT STEPS Capital expenditure and depreciation • Focus on profitability 180 – To keep ROCE above 12% and 150 To generate the highest possible – 120 shareholder value EUR million 90 • The best returns can be achieved from medium-sized investments to increase 60 the capacity of our current production 30 lines 0 2010 2011 2012 2013 2014 2015 2016 2017 2018E • In medium term, this means moderate growth and a strong focus on profitability Maintenance capex Growth capex Depreciation Growth capex: 2011 – 12 Debottlenecking in Simpele, Äänekoski and Kyro mills: total 150,000 t/a of FBB 2015 – 16 New folding boxboard production line in Husum: 400,000 t/a of FBB and linerboard production line conversion: 270,000 t/a of WKL 2017 New extrusion coating line in Husum: 100,000 t/a PE coating capacity Investor presentation 13 1-9/2018

Our cash flow generation is back on track after the heavy investment years of 2015 – 2016 Free cash flow in EUR million and % of EBITDA EUR million % • Our free cash flow has improved due to 200 80 – Improved profitability 150 60 – Decreased capex Good working capital discipline – 100 40 • Capital allocation in the near future 50 20 – Dividend: supported by strong performance – Capital structure: deleveraging continues to levels 0 0 below 1.0x -50 -20 – CAPEX: return-based allocation (ROCE above 12%) -100 -40 2013 2014 2015 2016 2017 LTM FCF, EUR million FCF/EBITDA,% Investor presentation 14 Comparable EBITDA (LTM) EUR 341 million 1-9/2018

Operating environment and demand drivers

Paperboard is the packaging material of the future Growing by 3% per year The total packaging market is USD 850 billion Average annual growth rate of paperboard packaging Glass 350 +3% per year 2017 – 2022 Board Metal 7% 300 and 13% 250 Paper 36% USD USD bn 200 300 bn 150 34% 100 10% Plastic Other 50 fibre- based 0 2012 2013 2014 2015 2016 2017 2022F 16 Source: Smithers Pira Investor presentation 1-9/2018

We have good growth opportunities in premium paperboards FSB 36% Americas EMEA APAC FBB Annual global Other demand fresh fibre growth for grades FBB, FSB and FSB FSB WKL is 28% FBB estimated to be 41% FBB 3% Recycled Other Other fresh fibre grades fresh fibre CWKL 38% grades grades WKL WKL Recycled Recycled CWKL White White 77% grades WKL grades testliner testliner White testliner Cartonboard White linerboard Cartonboard White linerboard Cartonboard White linerboard 5 million 22 million 3 million 10 million 3 million Total annual 10 million tonnes tonnes tonnes tonnes tonnes demand: tonnes FSB = food service board, FBB = folding boxboard, SBS = other fresh fibre grades, CUK, WLC = recycled grades WKL = uncoated white kraftliner, CWKL=coated white kraftliner Investor presentation 17 1-9/2018 Source: Metsä Board research based on several sources, e.g. CEPI Cartonboard and Containerboard, RISI

We sell globally, but have a regional approach The Americas is the biggest growth area EMEA AMERICAS APAC SHARE OF TOTAL PAPERBOARD SHARE OF TOTAL PAPERBOARD SHARE OF TOTAL PAPERBOARD DELIVERIES IN 1 – 9/2018 DELIVERIES IN 1 – 9/2018 DELIVERIES IN 1 – 9/2018 70% 23% 7% Demand drivers: Demand drivers: Demand drivers: • Stronger consumer • Strong consumer • Growing upper and middle confidence confidence in the US, classes, and increased private consumption • Acceleration in purchasing power recovering in Latin America environmental • More brand-aware commitments and • Emerging environmental consumers regulations considerations • Continued shift to modern • Stricter food safety • Trend for lightweight retail and mobile requirements packaging – but limited commerce local capacity in FBB Investor presentation 18 1-9/2018

Rapidly growing concern about non-renewable packaging materials is increasing demand for fresh fibre paperboards