metsäboard corporation investor presentation...metsÄ board is part of metsÄ group metsä board...
TRANSCRIPT
Metsä Board CorporationInvestor presentationJanuary–December 2019
This is Metsä Board ………………………… 3 FY 2019 Results, debt and financing …… 33
Planned investments ……………………….. 14 Sustainability ………………………………. 50
Profitability drivers ………………………….. 19 R&D ………………………………………… 61
Operating environment …………………….. 26 Owners, management, contacts ……….... 73
2
Contents
3
Metsä Board in brief
Foldingboxboard56%
Whitekraftlainer
25%
Marketpulp13%
Other5%
FY 2019:EUR 1,932m
EMEA71%Americas
21%
APAC8%
FY 2019:EUR 1,932m
Sales split by product
Sales split by region
Year 2019: Sales EUR 1.9bn, comparable operating result EUR 184m,ROCE 10.4%, Capex EUR 99m, Personnel 2,400
Total paperboard capacity2Mt/a
Net pulp balance*+600,000t/a
STRONG MARKET POSITION#1 in folding boxboard and white kraftliner in Europe#1 in coated white kraftliner globallyLargest European importer of folding boxboard to US
MAIN CUSTOMERSBrand-owners, converters, merchantsand manufactures of corrugated products
TOP10 customers: ~25% of salesLargest customer: <5% of sales
8production units
in Finland and Sweden
METSÄ BOARD IS PART OF METSÄ GROUPMetsä Board owns 24.9% of its associated company Metsä FibreMetsäliitto Cooperative, owned by 103,000 Finnish forest owners, holds 46% of Metsä Board’s shares and 66% of votes
*Including Metsä Board’s ownership in Metsä Fibre
Our focus is on premium fresh fibre paperboards mainlyused for consumer goods packagingTotal paperboard capacity 2Mt, of which 2/3 folding boxboard and 1/3 white kraftliners
Folding boxboards and food service boards
4
White kraftliners, coated and uncoated
Food and FoodserviceOther
consumergoods (e.g.
pharma,cosmetics)
Graphicalend-uses
Folding boxboard end-uses*
Shelf-ready andPoint-of-sale(food,beverages,cosmetics)
Otherconsumer
goods (e.g.electronics)
E-commerce
White kraftliner end-uses*
*) all data is indicative and based onMetsä Board’s own estimates
d
5
URBANISATION DIGITALISATION CLIMATE CHANGE GLOBALISATION POPULATION GROWTHM E G A T R E N D S :
FOCUSWe are the leader in sustainability, focusing on premium fresh fibreproducts for consumer and retail packaging. The high performanceof our products is based on technical excellence and tailor madehigh-quality Nordic pulps.
GROWTHWe grow globally together with our existingand new customers by offering sustainable, safe and high-performing products. Our growth is based on skilled people,industry leading products and new innovative packaging solutions.
PROFITABILITYOur profitability is based on the efficiency of our operations andprioritisation of businesses that benefit from the high performance of ourproducts and services.
S T R A T E G Y
Packaging solutionsthat respect nature
M I S S I O N
V A L U E S Responsible profitability Reliability Cooperation Renewal
Preferred supplier of innovative andsustainable fibre-based packaging
solutions, creating valuefor customers globally
V I S I O N
Metsä Board’s strategy
6
We have a leading position in Europe in ourmain products
35% 30%
Folding boxboardin Europe
Total capacity 3.9m tonnes
White kraftlinerin Europe
Total capacity 2.2m tonnes
MetsäBoard
#1
#2#3
#4
#5
Others MetsäBoard
#1
#2#3
#4
#5
Others
• Metsä Board is #1 in coatedwhite kraftliners globally
• We are #1 European importer ofFBB to US
• In APAC we focus on high-quality FBB segment
• Regional sales split ofpaperboard deliveries (2019):
• 70% EMEA
• 24% Americas
• 6% APAC
FBB = Folding boxboardWKL = White kraftliner
Our production is close to our main raw material
7
Husum, SWE400,000 t/a FBB250,000 t/a WKL730,000 t/a Pulp
Kemi425,000 t/a WKL610,000 t/a Pulp*
Kaskinen370,000 t/a BCTMP
Kyro190,000 t/a FBB
Äänekoski260,000 t/a FBB1.3 million t/a Pulp*
Simpele290,000 t/a FBB
Joutseno330,000 t/a BCTMP690,000 t/a Pulp*
Tako210,000 t/a FBB
Wood sourced fromFinland, Sweden,Baltics and Russia.
*Metsä Fibre mill
Our net balance in pulp in 2019,including the 24.9% ownership inMetsä Fibre, is 600,000 t/a
Total paperboard capacity:Folding boxboard (FBB): 1,350,000 t/a
White kraftliner (WKL): 675,000 t/a
Wood products Paperboard
METSÄTISSUE
METSÄFOREST
Wood supply andforest services
METSÄFIBRE
Pulp and sawntimber
METSÄWOOD
METSÄBOARD
Tissue andgreaseproof papers
Group’s parent company, owned by 103,000 Finnish forest ownersMETSÄLIITTO COOPERATIVE
METSÄ GROUP
METSÄ BOARDOWNS 24.9%
• High availability of Northern wood• Consistent quality of fibres that are tailor-made for the end products
We have good control of wood raw materials,from forests to pulp and board production
Through Metsä Fibre’s ownership Metsä Board’s annual netpulp balance is 600,000 tonnes long8
100% 100% 100%50.1% 46%Metsäliitto’s ownership:
9
Annual paperboard delivery volumes have remainedstable during the recent years
763 801 865 988 1144 1215 1207
373 444539
580658 615 584
0
500
1 000
1 500
2 000
0
500
1 000
1 500
2 000
2013 2014 2015 2016 2017 2018 2019White kraftliner deliveries Folding boxboard deliveries Total paperboard capacity
Metsä Board’s annual paperboard deliveries and current capacity, 1,000 tonnes
* During 2013-2017 the demand growth for FBB and WKL was ~3%/year
1,00
0 to
nnes
Total paperboard capacity 2 million tonnes
Main growth and development investments in2014–2020E:
2020E Husum pulp mill renewal
2019 Husum pulp mill renewal,new sheeting line in Äänekoski
2018 New baling line in Kaskinen BCTMP mill:30,000 new BCTMP capacity
2017 New extrusion coating line in Husum:100,000 t/a PE coating capacity
2015–16 New folding boxboard production line inHusum: 400,000 t/a of FBB and linerboardproduction line conversion: 250,000 t/a ofWKL
10
Investments have been moderate during 2017–2019Husum pulp mill renewal will increase capex in the coming years
0
50
100
150
200
250
2014 2015 2016 2017 2018 2019 2020E
Capex for growth and developmentMaintenance capexDepreciation
Capital expenditure and depreciation
EUR
mill
ion
NOTE! Estimatedinvestments in 2020 areprovisional and dependenton the environmental permitprocess related to theHusum pulp mill renewal
Our long-term financial targets aim for profitabilityand a strong balance sheet
Comparable ROCE:Target at least 12%
8.111.2
14.410.4
2016 2017 2018 2019
2.0
1.2 1.0 1.1
2016 2017 2018 2019
Net debt/comparable EBITDA:Maximum level 2.5x
> 12%
< 2.5x
1111
76
50 5159
2016 2017 2018 2019
Dividend policy:Payout ratio at least 50% of net result
> 50%
Our aim is to create the highest possibleshareholder value
Enterprise value, EUR million
0
500
1000
1500
2000
2500
3000
2012 2013 2014 2015 2016 2017 2018 2019
Net debt Market capitalization
Dividend, EUR and payout ratio, %
0%
25%
50%
75%
100%
0,00
0,05
0,10
0,15
0,20
0,25
0,30
2012 2013 2014 2015 2016 2017 2018 2019
Dividend, EUR Dividend/EPS, %
12
Year 2019 is the Board’s proposal to AGM
Year 2018 and 2019 total distributions consistof a dividend and other distribution of equity
• Capital allocation for 2020– EUR 85 million dividend will be paid in April
(Dependent on AGM’s decision on March)– CAPEX: Estimated EUR 200-210 million, including
EUR 50-60 million annual maintenance capex andEUR 130-140 million capex to Husum pulp millrenewal (dependent on the timing of environmentalpermit granted by Swedish authorities)
• Husum pulp mill renewal and estimated impactson capital allocation going forward
– Phase 1: Total investment value EUR 320 million,divided over 3 years in 2019-2022
– Financing mainly through incremental debt – costestimated at ~1% p.a. or EUR 2 million/year
– Dividend policy unchanged
-40
-20
0
20
40
60
80
-100
-50
0
50
100
150
200
2014 2015 2016 2017 2018 2019
FCF, EUR million FCF/EBITDA,%
13
Capital allocation
EUR million %
Free cash flow in EUR million and % of EBITDA
ComparableEBITDA,EUR 279 million
FCF=Cash flow from operations after investments
Planned investmentsRenewal of Metsä Board Husum pulp millNew bioproduct mill and a sawmill line by Metsä Fibre
Metsä Board: Husum, SWERenewal of the pulp millEUR 320 million (first phase)
Metsä Fibre: Kemi, FINNew bioproduct millEUR ~1.5 billion
Metsä Fibre: Rauma, FINNew pine sawmill lineEUR ~200 million
Metsä Board and Metsä Fibre are planning three majorinvestments with total value of EUR 2 billionThe aim is to further improve the competitiveness of pulp and energy productionand move towards fossil-free mills
Metsä Board owns 24.9% of Metsä Fibre
Husum pulp mill renewal
2019 2020 2021 2022
Companyexpects tomake the finalinvestmentdecision*
New recoveryboiler andturbineexpected to bein operation
Pre-engineering
phaselaunched
Companyapplies
amendment toenvironmental
permit
16
The renewal consists of two phasesØ Create a solid foundation to increase paperboard capacity in the Husum integrate in the future
Ø Secure cost efficient pulp and energy production
Ø Enable the company to reach its ambitious target of fossil-free mills by 2030
Second phase, in 2020s: New fibre line. To be implemented after the first phase is fully completed
First phase, 2019–2021E: New recovery boiler and turbine
Firstinvestmentsmade
* After the environmental permit is granted
Investment value• Investment value of first phase is EUR 320 million,
divided over 2019–2022– In 2019 investments were EUR 21 million
Estimated impacts of the first phase• Self-sufficiency in electricity increases from 40% to over 80%*• Reduced amount of purchased oil• Lower maintenance capex and costs
– Reduced duration and extended intervals between planned shutdowns →Increased pulp and paperboard production
• Annual cash flow improvement EUR 35 million, of which EUR 30 millionEBITDA improvement and EUR 5 million lower capex
• Financing costs to increase EUR 2 million per year
17
Husum pulp mill renewal in figures
*) Annual increase in electricity production about 330 GWh,resulting in cost savings at 2019 electricity prices of approximately EUR 12 million
New bioproduct mill* in Kemi, Finland• Size of the investment EUR 1.5 billion• Annual capacity 1.5 million tonnes of chemical pulp and
several other bioproducts• Final investment decision expected in the summer of 2020
– environmental permit application filed in September 2019
New sawmill line in Rauma, Finland• Size of the investment EUR 200 million• Annual capacity 750,000 cubic meters• If realised, would be the most modern and efficient sawmill
line in the world• Final investment decision in the beginning of 2020
18
Metsä Fibre is planningtwo major investments
*) would replace the existing pulp mill in Kemi, withannual capacity of 630,000 tonnes of chemical pulp
Main contributors impactingMetsä Board’s profitability
Component Unit Change Impact on EBIT
Folding boxboard Price +/- 10% > EUR 100 million
White kraftliners Price +/- 10% ~ EUR 50 million
FX USD/EUR +/- 10% EUR 63 million
SEK/EUR +/- 10% EUR 39 million
Pulp PIX price of SW/HWper tonne
+/- 10% EUR 30 million
Wood Cost, delivered toFinnish mills
+/-10% EUR 30 million*
Cost, delivered toHusum
+/-10% EUR 20 million
20
Our main profit components and sensitivities
In 2019, Metsä Board sourced 8.2* million m3
wood, of which 50% from Finland; 26% fromSweden; 13% from Baltics, Germany andPoland; and 11% from Russia.
USD57 %SEK
34 %
GBP7 %
Others2 %
Annual FX transaction exposuretotal EUR 1.1 billion
* Includes the wood used in the pulp purchased from Metsä Fibre
Wood is the biggest cost component inMetsä Board’s total costs
Cost inflation accelerated in 2018 andcosts remained at a high level in 2019Prices of raw materials remained high in 2019. Woodcosts were at a higher level than the year before, butdeclined slightly towards the end of the year.Total costs in 2019 were EUR 1.70 billion(2018: EUR 1.69 billion).
Wood28%
Logistics16%
Chemicals16%
Energy14%
Personnel12%
Otherfixed14%
2019 Results21
Metsä Board’s cost split in 2019
500
600
700
800
900
1000
1100
1200
500
600
700
800
900
1000
1100
1200
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Folding boxboard
White-top kraftliner
22
Price development of folding boxboard andwhite kraftliner in Europe
EUR/ tonne
Sources: Fastmarkets RISI & Fastmarkets FOEX
EUR/ tonne
350400450500550600650700750800850900950100010501100115012001250
350400450500550600650700750800850900950
100010501100115012001250
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Source: Fast Markets Foex
USD or EURUSD or EUR
23
Price development of pulp in Europe (PIX)Long-fibre (SW) and short-fibre (HW) pulp
Long-fibre, USD
Long-fibre, EUR
Short-fibre, EUR
Short-fibre, USD
Price development of roadside pulpwood in Finlandand Sweden
Pulpwood roadside prices in Finland, EUR/m3 Pulpwood roadside prices in Sweden*, SEK/m3
Sources: Luke (Natural Resources Institute Finland) and Skogsstyrelsen (The Swedish Forest Agency)
2022242628303234363840
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Spruce Birch Pine150170190210230250270290310330350370390
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Spruce Birch Pine
24
FX rates development: EUR/USD and EUR/SEKEUR/USD
25
EUR/SEK
1,08
1,1
1,12
1,14
1,16
1,18
1,2
1,22
1,24
1,26
29.1
2.20
1729
.1.2
018
28.2
.201
831
.3.2
018
30.4
.201
831
.5.2
018
30.6
.201
831
.7.2
018
31.8
.201
830
.9.2
018
31.1
0.20
1830
.11.
2018
31.1
2.20
1831
.1.2
019
28.2
.201
931
.3.2
019
30.4
.201
931
.5.2
019
30.6
.201
931
.7.2
019
31.8
.201
930
.9.2
019
31.1
0.20
1930
.11.
2019
31.1
2.20
199,6
9,8
10
10,2
10,4
10,6
10,8
11
29.1
2.20
1729
.1.2
018
28.2
.201
831
.3.2
018
30.4
.201
831
.5.2
018
30.6
.201
831
.7.2
018
31.8
.201
830
.9.2
018
31.1
0.20
1830
.11.
2018
31.1
2.20
1831
.1.2
019
28.2
.201
931
.3.2
019
30.4
.201
931
.5.2
019
30.6
.201
931
.7.2
019
31.8
.201
930
.9.2
019
31.1
0.20
1930
.11.
2019
31.1
2.20
19
Operating environment forfresh fibre paperboards
The total packaging market and estimated growth forpaperboard packaging
The size of total packaging market is USD 920 billion
27
Average annual growth rate of paperboard packaging
33 %
12 %
36 %
13 %
6 % Paperboard
Otherfibre-based
Plastic
Metal
Glass
0
50
100
150
200
250
300
350
400
2014 2015 2016 2017 2018 2019 2024f
+3% per year 2019–2024
Source: Smithers Information Ltd
28
Metsä Board operates in a growing market
0
10000
20000
30000
40000
50000
60000
70000
80000
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
1000
met
ric to
nnes
Asia 2.4%/a
Containerboard growth forecastCartonboard growth forecast
Source: RISI Paper Packaging Forecasts
0
25
50
75
100
125
150
175
200
225
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Mill
ion
met
ric to
nnes
29
We have good growth opportunities in premiumpaperboards
Cartonboard White linerboardCartonboard White linerboard Cartonboard White linerboard
Total annualdemand:
10 milliontonnes
3 milliontonnes
10 milliontonnes
5 milliontonnes
22 milliontonnes
3 milliontonnes
Americas EMEA APAC
FSB
FBB
Otherfresh fibre
grades
Recycledgrades
CWKLWKL
White testliner
FSB
FBB
Otherfresh fibre
grades
Recycledgrades
CWKLWKL
Whitetestliner
FSB
FBB
Otherfresh fibre
grades
Recycledgrades
WKLWhite
testliner
FSB = food service board, FBB = folding boxboard, SBS & CUK = other fresh fibre grades, WLC = recycled gradesWKL = uncoated white kraftliner, CWKL=coated white kraftliner
28%
77%
41%
38%
36%
Source: Metsä Board research based on several sources,e.g. CEPI Cartonboard and Containerboard, RISI
Total containerboard market170Mt
Linerboards102Mt
White linerboard11Mt
White kraftliner4Mt
Whitecoated
kraftliner1Mt
Whiteuncoatedkraftliner
3Mt
Whitetestliner
7Mt
Brown linerboard91 Mt
Brownkraftliner
24Mt
Browntestliner
67Mt
Fluting68Mt
Fresh fibrefluting8Mt
Recycledfluting60Mt
Metsä Board’s fresh fibre linerboards are at the top ofthe quality pyramidGlobal annual demand in containerboards totals 170 million tonnes
Source: Metsä Board’s own estimate based on several sources30
31
Paperboard demand and supply by region
AMERICAS24%
EMEA70%
APAC6%
FOCUS ON HIGH-QUALITYSEGMENT
• Growing middle class andincreased purchasing powersupport demand forpackaging
• Plenty of local supply incartonboard
• Metsä Board’s focus is onhigh-quality segment
STRONG MARKET POSITIONIN EUROPE
• Stable demand in FBB andWKL
• Increased environmentalawarness and tightenedregulations support demandfor sustainable packagingmaterials
• Several conversions frompaper into lower qualitycontainerboard production
Share of Metsä Board’s total paperboard deliveries in 2019:
GROWTH POTENTIAL INNORTH-AMERICA
• Limited availability oflightweight FBB and coatedWKL
• Decreased local supply ofSBS/FSB and changingimport volumes from China
• FSB demand growing
• Functionality, durability and consumer experience are thekey words
• Demand for white kraftliner driven by– Increasing branding of the packaging– Trend towards shipping the product in its own container– Personalisation of boxes, supported by advancing technology
in digital printing
• The global value of E-commerce is expected to grow by17% per year on average, increasing its share of the retailtrade from 12% to 22% in 2018–2023
Branding and personalisationbecoming more important inE-commerce
32 Sources: eMarketer, Smithers Information Ltd
2019 Full year results
34
Key financialsQ4/19 Q4/18
ChangeQ4/19
vs. Q4/18FY 2019 FY 2018
Change2019
vs. 2018
Sales EUR, m 478 458 4% 1,932 1,944 -1%
EBITDA* EUR, m 59 81 -27% 279 344 -19%
Operating result* EUR, m 39 60 -35% 184 252 -27%
% of sales* % 8.2 13.1 9.5 13.0
Metsä Fibre’s share of operatingresult* EUR, m 1 32 -97% 43 124 -64%
Earnings per share EUR 0.05 0.14 -64% 0.41 0.57 -28%
ROCE* % 8.9 13.7 10.4 14.4
Capex (own assets) EUR, m 54 34 59% 95 70 33%
Cash flow from operations EUR, m 90 30 195% 201 151 33%
IB Net debt, at end of period EUR, m 308 335 -8% 308 335 -8%
*comparable
• Strong cash flow• Paperboard delivery volumes slightly lower
due to seasonality, prices remained stable• In Europe, market pulp prices continued to
decline• Profitability supported by less maintenance
and lower production costs• First investments made in the renewal of
the Husum pulp mill
• Board of Directors proposes a distributionof EUR 0.24 per share for 2019
35
Q4 2019 in summaryCOMPARABLE
OPERATING RESULT
39.1EUR million
OPERATINGCASH FLOW
89.6EUR million
PAPERBOARDDELIVERIES
440,000tonnes
TOTALINVESTMENTS
56.8EUR million
Total paperboard delivery volumes slightly downyear-on-year
265 304 299 276 297 328 297 293 302 299 305 300
163173 170
152171
161149 134 138 146 161 140
0
100
200
300
400
500
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
White kraftliner Folding boxboard
1,00
0 to
nnes
36
1,00
0 to
nnes
FY 2018:1,830,000 tonnes
FY 2019:1,791,000 tonnes
-2%
+3%
Paperboard sales development bymarket area in 2019
37
EMEA860,000(844k)
Americas242,000(252k)
APAC105,000(119k)
FBB deliveries in 2019 (2018)total 1,207,000 tonnes (1,215k)
71%
EMEA385,000(438k)Americas
190,000(173k)
APAC9,000 (4k)
WKL deliveries in 2019 (2018)total 584,000 tonnes (615k)
EMEA• Stable demand in FBB with rising price levels• Soft market situation in WKL in H1, demand picked
up during the summer. Slightly improved price levelsyear-on-year
AMERICAS• Slightly lower delivery volumes in FBB with clearly
improved price levels. Stable market situation inWKL with increased delivery volumes
APAC• Lower FBB delivery volumes
20%
9%
66%
33%
FBB = Folding boxboardWKL = White kraftliner
69 62
59 41
6443
60
39
0
60
120
180
240
300
2018 2019
Higher paperboard prices supported 2019 sales,profitability burdened mainly by lower market pulp prices
SalesEUR million
492 487
519 477
475 489
458 478
0
400
800
1200
1600
2000
2018 2019
38
Comparable operating resultEUR million and % of sales
EUR
milli
on
EUR
milli
on
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
FY 2018:EUR 252 million
13.0%
FY 2019:EUR 184 million
9.5%
FY 2018:EUR 1,944 million
FY 2019:EUR 1,932 million
39
Comparable operating resultQ4 2019 vs. Q3 2019 and FY 2019 vs. FY 2018
Positive:+ less annual maintenance+ lower production costs+ sale of emission rights
Negative:- weakened market pulp prices- Metsä Fibre’s result share- lower paperboard delivery volumes
Positive:+ higher prices in FBB and WKL+ FX
Negative:- weakened market pulp prices- Metsä Fibre’s result share- higher wood and raw material costs in paperboard and pulp
Comparable operating resultQ4 2019: EUR 39.1 million(Q3 2019: EUR 42.5 million)
Comparable operating resultFY 2019: EUR 184.4 million(FY 2018: EUR 251.9 million)
4%
6%
8%
10%
12%
14%
16%
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19
Comparable return on capital employed, %
Quarterly Rolling 12m Target40
In 2019 comparable ROCE at 10.4%
Target level > 12% R12m10.4%
Q4/19:8.9%
Market pulp price decline decelerating butcoronavirus causes uncertainty
41
Pulp price (PIX) development in Europe and China• In 2019 European NBSK (USD) decreased by
16%, while Chinese prices dropped by 28%*.Some stabilisation especially for Chinese pricestowards the end of the year
• Strong Chinese consumption throughout 2019,driven by the resurgence of paper and paperboardproduction. Demand trend remains expanding. InEurope, the trend remains rather weak
• Global stock levels for both NBSK and BHK havedeclined from the peak levels in the summer 2019
Long-fibre pulp, Europe Long-fibre pulp, China (net)
Source: Fastmarkets Foex
USD/tonne USD/tonne
0
200
400
600
800
1 000
1 200
1 400
0
200
400
600
800
1 000
1 200
1 400
2013
2014
2015
2016
2017
2018
2019
*) calculated from the difference between the average yearly prices
68
106
30 3654
30 36 3144
90
5979
20 2343
-3
2913
26 37
-50
0
50
100
150
200
250
-50
0
50
100
150
200
250
Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19
Cash flow from operations, quarterly Free cash flow, quarterlyCash flow from operations, rolling 12 months Free cash flow, rolling 12 months
EUR
mill
ion
42 Free cash flow = cash flow from operations − total investments
Strong operative cash flow in 2019Q4 cash flow supported by release in working capital
EUR
mill
ion
43
Near-term outlook• Strikes in Finnish mills will have a negative
impact on operating result of approximatelyEUR 20 million, affecting mainly Q1 2020
• Metsä Board’s paperboard delivery volumes willbe roughly at the same level as in Q4 2019
• Paperboard prices expected to be stable, pulpprices are not expected to decline
• No major planned maintenance shutdownsduring Q1 2020
• Stable production costs, prolonged mild wintermight increase wood costs
Metsä Board’s comparable operatingresult for the first quarter of 2020 isexpected to weaken compared to thefourth quarter of 2019 due to strikes atmills in Finland.
44
Result guidance forJanuary–March 2020
Debt and financing
358 335 388 344 335 297 380 352 308
1.2 1.1 1.21.0 1.0 0.9
1.2 1.2 1.1
0,0
0,5
1,0
1,5
2,0
2,5
3,0
0
100
200
300
400
500
600
12/2017 3/2018 6/2018 9/2018 12/2018 3/2019 6/2019 9/2019 12/2019
Net debt, EUR million Net debt to comparable EBITDA (last 12 months)
46
Strong balance sheet at the year endNet debt at EUR 308 million, leverage 1.1x
Net debt / EBITDA target level: <2.5
EUR
mill
ion
0
50
100
150
200
250
2020 2021-2024 2025 2027
Bonds Loans from financial institutions Pension loans Finance lease liabilities47
Debt and its maturity
Long-term interest-bearing debt maturity profile as per 31 December 2019
EUR
mill
ion
• In 2019, Metsä Board agreed on a new bank financing facilityconsisting of a five-year term loan of EUR 150 million and a five-year RCF of EUR 200 million to replace the drawn loan of EUR 50millionand undrawn RCF of EUR 150 million
• Interest-bearing debt on 31 December was EUR 445 million(31 Dec 2018: EUR 447 million)
Rating agency Rating andoutlook
Last update
S&P Global BBB-stable
02/2018Upgrade from BB+
Moody‘s InvestorServices
Baa3stable
01/2019Upgrade from Ba1
Metsä Board’s both credit ratings are investment grade
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Net financial costs in 2019 were EUR 15.4 million
32 31 36 22 15
3.8
3.3 3.3 3.3
2.5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
0
10
20
30
40
2015 2016 2017 2018 2019
Net financial costs, EUR millionAverage interest rate at the end of period, %
EUR million %
• Net financial costs, including foreignexchange differences, in 2019 were EUR15.4 million (FY 2018: 22.3)
• Average interest rate on loans at the end ofreview period was 2.5% and the averagematurity of long-term loans was 6.4 years
• No major differences in annual interestpayments after the new financialarrangements on 30 September 2019
• Annual financial costs expected to increaseby EUR 2 million with the Husum pulp millrenewal
Debt structure and liquidity on 31 December 2019
249149
24
23Bonds
Loans fromfinancialinstitutions
Pension loans
Finance leasesand other loans
24
134
200
190
Cash and cashequivalents
RCF, unraised
Pension loans,unraised
Interest-bearing debtEUR 445 million
Available liquidityEUR 524 million
Average maturity of long-term loans on 31 December 2019 was 6.4 years.49
Sustainability
• Growing consumer awareness:Origin and transparency ofmaterials, renewability, resourceefficiency and recylability
• Brand owners are committed toreducing their carbon footprints:Lighter packaging reduces CO2emissions across the value chain
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Sustainability is oneverybody’s agenda
“Our comprehensive approachto reducing our environmental
impact means looking at allaspects of our business, how
they intersect and how we canintegrate new solutions to
create meaningful andsustained change.”
– Starbucks website
“We want low-carbon to becomethe new normal, so we’re takingaction to reduce GHG emissions
throughout our value chain.”
– Unilever website
• Consumers regard paperboard as a more responsible choice than plastic packaging –willingness to pay more for it
• Paperboard cartons preserved the cherry tomatoes at least as well as the plastic equivalent• The climate effect of a recycled PET container was calculated at six times higher than the average
value for the paperboard cartons
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Alternative to plastics:Paperboard adds value to packaging
A detailed consumer study with cherry tomatoes was carried out in Finland by Sense N Insight,Luke (Natural Resources Institute Finland) and Metsä Board
Replacing fossil-based materials,i.e. plasticsThe solution:renewable andbiodegradablewood fibre
Increased wastegeneration due tourbanisationThe solution:Paperboard isrecyclable– and widelyrecycled
Reducing carbonfootprintThe solution:renewable energy,efficient energyand water usage inproduction
Ensuring foodsafetyThe solution:pure and safefresh fibres in foodpackaging
Fresh fibre paperboards offer solutions to major challenges
Lighter packaging reduces CO2 emissions across thevalue chain – Our fossil CO2 emissions per product tonnehave reduced by almost 50% since 2009
Less energy, water andraw material consumed
Lesstransportweight
Less wastegenerated
• Metsä Board sources its wood mainlyfrom Finland and Sweden (76 %)
• All wood used is 100% traceable andcomes from sustainably managed forestsources ensuring the biodiversity andrecreational use of forests
• 76% of wood sourced is certified(remaining 24 % from controlled forestsources)
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Wood is our main rawmaterial
Finland – the largest forest cover in Europe
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100+MILLION M3
Annual growth of Finnish forests isover 100 million m3 – more than ever
Forests grow more than they are used,annual harvesting 78 million m3 (2018)
Four seedlings are planted for eachharvested tree
Over 20% of the Finnish export comesfrom forest-based products
The area of Finland
Cities, villages and roads
Fields and agricultural use
Lakes and rivers
Forest
10%
10%
75%
5%
• Metsä Board uses onlysurface water in its processes
• Water is been recirculatedin processes several times
• 99% of the water used is returnedback to the close-by waterwaysafter thorough purification
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We have decreased ourprocess water use by 29%since 2010
Owngeneration20 %
Purchasedthrough PVOshareholding32 %
Purchasedelectricity
48 %
Electricity sourced in 2019(total 2.4 TWh)
58
83% of our total energy usedis fossil free Renewable,
mainly wood-based sidestreams49 %Nuclear
power34 %
Fossil-based17 %
Primary energy used in 2019(total 11.7 TWh)
• Our energy efficiency has improved by 12% during2009–2019
• After OL31) starts up, we will be nearly self-sufficient in electricity inFinland
− Self-sufficiency includes own generation and electricity purchasedthrough PVO holding or from Metsä Fibre
− After the first phase of Husum pulp renewal, self-sufficiency inelectricity increases from 40% to over 80% at Husum integrate
• Metsä Board’s shareholding in PVO2) is 3.2%− Fair value as per 31 December 2018 was EUR 266 million
1) Olkiluoto Nuclear Power Plant2) Pohjolan Voima Oyj is a non-listed public limited liability company.
It supplies electricity and heat for its shareholders at cost price3) Out of 48% share of purchased energy, 14% is from Metsä Fibre and 34% includes other purchased energy
3)
Certified wood fibre• Share of certified fibre >90%• In 2019: 76%
At Metsä Group level:
Increasing the amount ofcarbon stored in forests andproducts• Area of regeneration and
management of young stands• Amount of carbon stored in
products (t)
Safeguarding biodiversity• Increasing the amount of
decayed wood
Fossil free mills• Share of fossil free energy
100%, 0 tCO2 (Scope 1)• In 2019: 82%
Fossil-free purchased energy• Share of fossil free energy
100%, 0 tCO2 (Scope 2)• In 2019: 85%
Resource efficient production• Utilisation of side streams
100%• In 2019: 99%• Process water use per prod.
ton (m3/t) -30% vs. 2018• In 2019: -11%• Energy efficiency
improvement>10% vs. 2018
• In 2019: -0.5%
Metsä Board’s 2030 sustainability targets and actuals in 2019CLIMATE ANDENVIRONMENT
SUSTAINABLE CHOICES WELL-BEINGFOREST
Responsible corporate culture• Ethics barometer 100%• In 2019: new ethics
barometer to be developed,coverage of Code of Conducte-training 97%
Accident-free workenvironment• Accident frequency LTA1 0• In 2019: LTA1 5.5
Fossil free raw materials• Share of fossil free raw
materials 100%• In 2019: 99%
Sustainable supply chain• Sustainable suppliers 100%• In 2019: commitment to
Supplier Code of Conduct:95%, compliance analysisconducted 82%, coverageof sustainabilityquestionnaire 58%
• Traceability of rawmaterials 100%
• In 2019: 93%
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External recognition and commitments
In ISS ESG Corporate Rating(previously oekom researchCorporate Rating) Metsä Boardhas a Prime status.
Metsä Board scored the Goldlevel in EcoVadis’ CSR rankingin 2019, and is included in the top1% of companies assessed in thecorrugated paper and paperboardindustry.
Metsä Board has been on the CDP Climate AList since 2016. In addition, Metsä Board scoredA- in the CDP Water and Forest Programmesand in the Supplier Engagement Rating in2019.
Metsä Board as a part of Metsä Group iscommitted to the UN Global Compact corporateresponsibility initiative and its principles in theareas of human rights, labour, environment andanti-corruption. Metsä Board also supports theUN’s Sustainable Development Goals, the SDGs.
Metsä Board’s GHG emissions’reduction targets are approvedby the Science Based Targetsinitiative.
In 2019, Metsä Board received arating of AAA (on a scale ofAAA-CCC) in the MSCI ESGRatings assessment.
In December 2019 , MetsäBoard received an overall ESGRisk Rating score of 17.6 and isconsidered by Sustainalytics tobe at low risk of experiencingmaterial financial impacts fromESG factors.
Link to MSCI Terms and Conditions
Metsä Board’s ESGperformance was rated“Advanced” in Vigeo Eiris ESGassessment in July 2019.
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Research and Development
Our key product development focus areasUnique opportunities for sustainability and yield gains throughraw material efficiency
Further lightweighting of paperboards
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Developing new barrier boards• Improved BCTMP• Microfibrillated cellulose (MFC)• Strength additives
• Dispersion barriers
• Bio-based raw materials
PRO
MO
TIO
NB
right
ness
PROTECTIONStiffness
Folding boxboard(FBB)
White lined chipboard(WLC)
Metsä Board’sfolding boxboard
Coated unbleached kraft(CUK)
The role of packaging is to promote the brand andprotect the product – in a cost-effective way
Solid bleached board(SBB)
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64
High-yield pulp makes the difference between foldingboxboard and other grades …
Three-layer structure of Folding BoxboardLight weight→ better yield and sustainability
High strength and bending stiffness→ secure protectionHigh brightness and smoothness→ excellent printability
Consistent quality→ improved production efficiency
SBS(100% chemical pulp)
Metsä Board FBB(up to 70% BCTMP,30% chemical pulp )
… and leave more trees standing
5 m3 of wood per tonne of pulp
3.4 m3 of wood per tonne of pulp
=
=
Lighter-weight paperboards: Better with Less
Metsä Boardlightweight paperboard
Average FBB –Folding boxboard
SBB –Solid bleached board
WLC –White lined chipboard
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The weights equal to a print job of 30 000 sheets on a standard size printing press
In 2019, we announced of our new, improved FBB portfolio, thatanswers to increasing demands for sustainability, product safetyand brand promotion
– Further opportunities for lightweighting– Enhanced visual properties– Industry-leading quality consistency– Improved supply security and availability
Enabled by our improved high-yield BCTMP and full R&D focuson paperboard
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Metsä Board enhances its leadingposition in premium lightweightpaperboards
Metsä Board has developed a newplastic-free eco-barrier paperboard forfood and food service purposes
Medium barrier for grease and moisture
Can be recycled in paper or paperboardstreams
END-USES: Food service, fresh, dry and frozen food andother packaging end-uses that require barrier properties
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New plastic-free barrierboard for even moredemanding end-uses
ü Plastic-freeü Easily recyclableü Protective with medium barrier for grease and moistureü Safe for direct food contact – no fluorochemicals or
optical brighteners (OBA)ü Brightest OBA-free board on the market, with excellent
printability on both sides
5 KEY ADVANTAGES OF METSÄ BOARD’S NEWECO-BARRIER PAPERBOARD
HIGHWVTR < 15 g/m²/d
PE barrier boards
MEDIUM15 ≤ WVTR < 100
MetsäBoardPrime FBB EB
MODERATE100 ≤ WVTR < 250
NONEWVTR > 250 g/m²/d
Paperboardswithout barrier
MetsäBoardPrime FBB EB1
NONE< 10 min
MODERATE10 min ≤ OGR < 6 h
MEDIUM6 h ≤ OGR < 72 h
HIGHOGR > 72 h
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The new plastic-free eco-barrier is the next stepin Metsä Board’s barrier board development
Oil and grease resistance (flat sample)
Moi
stur
e re
sist
ance
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Getting familiar with terminology:Barrier boards types
NO
N-B
IOB
ASED
BIODEGRADABLE
BIO
BAS
ED
NON-BIODEGRADABLE
PLA (polylactide): oftenbased on corn starch
PVA (polyvinyl alcohol)PBS (polybutylenesuccinate)
Green PE: made frombiomaterials
PE: made from fossil rawmaterials, used inextrusion coating
Examples of materials used in coating
Note!Biobased material
=Renewable material
≠Compostable
≈Biodegradable
• Metsä Board to establish a new Paperboard and PackagingExcellence Centre, to be operational in 2020
– Combines packaging design and R&D excellence under the same roof
– Enables to organise packaging design workshops and innovation daystogether with customers and partners
• We are testing and developing new types of paperboard incollaboration with Metsä Spring, Metsä Group’s innovationcompany
• Pro Nemus Visitor Center provides a new way to learn aboutMetsä Group’s business operations, products and innovationactivities
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A unique bioeconomy ecosystem inÄänekoski, FinlandDeveloping new paperboard and packagingsolutions of the future
Owners, management andcontact information
Market cap and foreign owners31 December 2019
Ownership distribution31 December 2019
Market cap and ownership distributionMetsä Board’s A- and B-shares are listed on Nasdaq Helsinki
0
5
10
15
20
25
0
500
1 000
1 500
2 000
2 500
3 000
12/2015 12/2016 12/2017 12/2018 12/2019
Market cap, EUR millionShare of foreign owners, %
MetsäliittoCooperative
46%
Domesticinstitutionalinvestors
19%
Domesticprivate
investors20%
Foreignowners
15%
EUR million
74
%
75
Metsä Board Corporate Management Team
Mika JoukioCEO
Chairman of CMT since 2014MG employee since 1990Share ownership: 297,700
Jussi NoponenCFO
Member of CMT since 2016MG employee since 2000Share ownership: 73,000
Sari PajariSVP, Marketing and Sales
Member of CMT since 2011MG employee since 2007Share ownership: 66,075
Ari KivirantaSVP, Development
Member of CMT since 2014MG employee since 1993Share ownership: 45,000
Harri PihlajaniemiSVP, Production
Member of CMT since 2017MG employee in 2001-2004and since 2017Share ownership: no ownership
Camilla WikströmSVP, HR
Member of CMT since 2019MG employee since 2001Share ownership: 17,807
Share ownerships are B-shares.MG = Metsä Group
Katri SundströmVice President, Investor relationsTel +358 10 462 [email protected]
Metsä Board CorporationP.O. Box 2002020 Metsä, Finlandwww.metsaboard.com
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Contact information
This presentation includes forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “may,” “plan,”“estimate,” “will,” “should,” “could,” “aim,” “target,” “might,” or, in each case, their negative, or any similar expressionsidentify certain of these forward-looking statements. Others can be identified from the context in which the statements aremade. By their nature, forward-looking statements are subject to assumptions, risks and uncertainties. Although webelieve that the expectations reflected in these forward-looking statements are reasonable, actual results may differ, evenmaterially, from those expressed or implied by these forward-looking statements. We urge presentation participants not toplace undue reliance on such statements.
The information and views contained in this presentation are provided as at the date of this presentation and are subject tochange without notice. Metsä Board does not undertake any obligation to publicly update or revise forward-lookingstatements, whether as a result of new information, future events or otherwise, except to the extent legally required.
Viewers should understand that this presentation does not constitute, and should not be construed as, an offer to buy orsubscribe for Metsä Board’s securities anywhere in the world or an inducement to enter into any investment activityrelating to the same. No part of this presentation should form the basis of, or be relied on in connection with, any contractor commitment or decision to invest in Metsä Board securities whatsoever. Potential investors are instructed to acquaintthemselves with Metsä Board’s annual accounts, interim reports and stock exchange releases as well as other informationpublished by Metsä Board to form a comprehensive picture of the company and its securities.
Metsä Board publishes inside information according to Market Abuse Regulation (MAR) and rules of the Nasdaq Helsinki.
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Disclaimer
