Mets Group Interim report Q3/2018 Ilkka Hml President and CEO 8 - PowerPoint PPT Presentation

Metsä Group Interim report Q3/2018 Ilkka Hämälä President and CEO 8 November 2018

Metsä Group – Q3 Excellent financial result • Sales EUR 4,290 million (1–9/2017: EUR 3,712 million) • Operating result* EUR 641 million (EUR 381 million) • Operating result of sales* 14.9% (10.3%) • Return on capital employed* 17.1 % (11.2%) • Sales increased due to greater delivery volumes and higher pulp and paperboard prices • The result improved thanks to increase in pulp prices and positive development of the paperboard business • Exchange rate fluctuations had a negative effect of approximately EUR 120 million on the operating result compared to January–September of the previous year *comparable 2 8.11.2018 Metsä Group

Metsä Group – Q3 Events in the third quarter • The market prices of long-fibre and short-fibre pulp continued to increase • Production at Metsä Wood’s birch plywood mill in Pärnu began • Bioproduct mill reached full production capacity in August • Metsäliitto Cooperative made an early repayment of its EUR 56 million loan to the European Investment Bank • Investments in tissue and cooking papers progressed according to plan • Juha Mäntylä was appointed COO of Metsäliitto Cooperative and Esa Kaikkonen CEO of Metsä Tissue Corporation • After review period, it was decided to build a demo plant to manufacture new kind of pulp-based textile fibre at Äänekoski 3 8.11.2018

Metsä Group – Q3 Sales quarterly EUR million 1 600 1,4281,477 1,386 1,330 1,328 1,254 1,265 1,204 1,248 1,255 1,255 1,205 1,156 1,184 1,143 1,175 1,216 1,235 1,260 1 200 800 400 0 4 8.11.2018 Metsä Group

Metsä Group – Q3 Comparable operating result EUR million 250 223 208 210 200 185 149 150 129 137 134 128 119 123 120 117 109 103 107 105 104 92 100 50 0 Q1/14 Q2 Q3 Q4 Q1/15 Q2 Q3 Q4 Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 5 8.11.2018 Metsä Group

Metsä Group – Q3 Change in comparable operating result EUR million Comparable operating result 1–9/2017 381 Sales prices 462 Sales volumes 90 Exchange rates -121 Raw materials and energy -111 Employee costs -22 Maintenance and other fixed costs -8 Depreciation -33 Others 4 Comparable operating result 1–9/2018 641 6 8.11.2018 Metsä Group

Metsä Group – Q3 Items affecting comparability EUR million 1–9/2018 Operating result (IFRS) 635.4 Items affecting comparability: Metsä Board / Efficiency improvement programme at Husum mill -4.1 Metsä Board /Teollisuuden Voima divesting Meri-Pori coal-fired power plant -1.7 Metsä Board / other +0.2 Items total -5.6 Comparable operating result 641.0 7 8.11.2018 Metsä Group

Metsä Group – Q3 Comparable ROCE % 20 17.1 14.2 15 11.2 11.1 10.5 Target >10% 10 5 0 1–9/2014 1–9/2015 1–9/2016 1–9/2017 1–9/2018 8 8.11.2018 Metsä Group

Metsä Group – Q3 Equity ratio % 60 52.7 50 45.0 43.9 43.2 37.9 40 30 20 10 0 12/2014 12/2015 12/2016 12/2017 9/2018 9 8.11.2018 Metsä Group

Metsä Group – Q3 Interest-bearing net liabilities EUR million 1 500 1 200 1,033 993 938 900 622 610 600 300 0 12/2014 12/2015 12/2016 12/2017 9/2018 10 8.11.2018 Metsä Group

Metsä Group – Q3 Capital expenditure EUR million 800 600 400 758 608 492 Full year 200 estimate 159 143 0 1–12/2014 1–12/2015 1–12/2016 1–12/2017 1–9/2018 11 8.11.2018 Metsä Group

Metsä Group – Q3 Personnel 12 000 10,410 9,599 9,348 9,300 9,126 9 000 6 000 3 000 0 12/2014 12/2015 12/2016 12/2017 9/2018 12 8.11.2018 Metsä Group

Metsä Forest – Wood Supply and Forest Services Wood supply in line with the targets • Wood was harvested according to targets, and Sales and comparable operating result Milj. euroa deliveries to customers were smooth • Due to good harvesting and transport 600 18 conditions, the stocks of wood were at normal 490 496 471 500 15 levels 433 429 401 378 356 399 397 376 • Metsä Forest delivered a total of 27.2 million 400 12 cubic metres (23.7) of wood 8.9 8.9 8.7 8.5 300 9 7.8 7.7 • 35% of the wood was bought digitally. In the 6.5 5.9 5.8 5.4 sale of forest management services, the figure 200 6 4.4 was 41% 100 3 • At the beginning of June 2018 an advance 0 0 financing service for digital wood trade was Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 introduced Sales Operating result 13 8.11.2018 Metsä Group

Metsä Wood – Wood Products Industry Wood products demand good except in the UK • Sales of engineered wood products remained Sales and comparable operating result unchanged, but the sales of the UK business EUR million declined clearly 150 15 • Demand for engineered wood products in the main 13.2 130 markets remained strong, in particular the order 115 115 120 122 121 119 120 12 110 108 109 10.7 106 book levels of spruce plywood were higher than last year 9.0 8.4 90 8.3 9 8.2 7.6 6.9 • Cost inflation, a decline in the profitability of the UK 6.2 5.5 60 6 business and the costs of new mills had a negative effect on the result. Production-related challenges 2.8 30 3 were reflected in delivery volumes and result • Production at Metsä Wood’s birch plywood mill in 0 0 Pärnu began officially at the end of August Sales Operating result 14 8.11.2018 Metsä Group

Metsä Fibre – Pulp and Sawn Timber Demand for pulp remained strong and prices at a good level • Increase in sales prices and increased pulp delivery Sales and comparable operating result volumes as a result of the bioproduct mill improved EUR million sales and operating result for January–September 700 280 601 629 • Market price of long-fibre and short-fibre pulp 609 600 240 552 increased by 34% and 33%, respectively, in 475 500 200 January–September compared to corresponding 187 409 423 389 416 422 427 165 period last year 400 160 145 126 • Delivery volumes of sawn timber decreased 11% 300 120 and market prices increased by 11% in January– 71 68 200 80 61 54 55 September 53 46 100 40 • Bioproduct mill in Äänekoski reached its full 0 0 production capacity in August • Prefeasibility study on renewal of Kemi pulp mill Sales Operating result progressed as planned 15 8.11.2018 Metsä Group

Metsä Fibre – Pulp and Sawn Timber Price of pulp (PIX) 2010–Q3/2018 USD EUR 1400 1400 1200 1200 1000 1000 800 800 600 600 400 400 ´10 ´11 ´12 ´13 ´14 ´15 ´16 ´17 ´18 Hardwood/EUR Pulpwood/EUR Hardwood/USD Pulpwood/USD Source: Foex 16 8.11.2018 Metsä Group

Metsä Board – Paperboard Industry Good development also in paperboard prices and volumes • The sales and comparable operating result improved due to the higher prices and delivery volumes of Sales and comparable operating result paperboard and pulp EUR million • Metsä Fibre’s increased pulp production and delivery 600 120 volumes had a clearly positive effect on result 492 519 474 479 451 475 500 100 • The operating result also improved due to mills’ im- 436 423 440 422 445 proved cost-efficiencies and better sales mix 400 80 69 64 • Planned maintenance shutdowns took place at the 59 300 54 60 50 Kemi and Husum mills during the third quarter 45 44 36 35 200 34 40 33 • The result was burdened by exceptional weather conditions, higher road transport costs in the United 100 20 States and cost inflation 0 0 • Exchange rate fluctuations including hedges had a negative effect of EUR 47 million on the operating Sales Operating result result compared to1–9/2017 17 8.11.2018 Metsä Group

Metsä Board – Paperboard Industry Prices of folding boxboard and white-top kraftliner in Europe 2011–Q3/2018 EUR/tonne 1200 1100 1000 900 800 700 600 2011 2012 2013 2014 2015 2016 2017 2018 Folding boxboard White-top kraftliner Sources: RISI, Inc. & FOEX Indexes Ltd 18 8.11.2018 Metsä Group

Metsä Tissue – Tissue and Cooking Papers Tissue and Cooking Papers’ production is being developed • Metsä Tissue’s sales growth was primarily due to Sales and comparable operating result EUR million increased sales volumes • The operating result was weakened by the higher 300 30 246 249 247 249 252 251 250 261 259 256 254 pulp price and weakening of the Norwegian krone, 250 25 23.3 Swedish krona and UK pound 20.6 200 20 • A new consumer products converting line is being 17.6 16.3 16.8 15.8 built at the Žilina mill in Slovakia 150 13.5 31.2 15 12.3 11.5 • A new away-from-home converting line is under 100 10 construction at the Raubach mill in Germany 6.4 50 5 • The modernisation of the baking paper machine in Düren, Germany, continues 0 0 • Esa Kaikkonen was appointed CEO of Metsä Tissue in September Sales Operating result 19 8.11.2018 Metsä Group