Metsä Board January-June 2017 Investor Presentation
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Metsä Board Investor presentation 1–6/2017 3 August 2017 Contents Investment highlights 3 Strategy and financial targets 13 Operating environment and market position 21 Growth in the paperboard business 30 Husum investment programme and update 37 Result for January–June 2017 44 Balance sheet and financing 55 Production, capacities and sourcing 63 Product development focus areas 69 Sustainability 74 Shares and owners 80 Appendix 84 Contact information 92 Investor presentation 1– 2 6/2017 Investment highlights Metsä Board in brief Sales split in 2016 10% 15% Folding boxboard Linerboards • Focus on premium fresh fibre paperboards Market pulp • Market leader in folding boxboard and white fresh fibre Others linerboard in Europe, global market leader in coated 50% white fresh fibre linerboard 25% • Global sales to over 100 countries and eight production units in Finland and Sweden Sales split by region in 2016 8 % • Strong fibre know-how and self-sufficiency in pulp 17 % • Sales in 2016 EUR 1.7 billion and comparable EMEA operating result EUR 137 million Americas • Appr. 2,500 employees in 23 countries APAC 75 % Investor presentation 4 1–6/2017 Solutions for wide variety of brand applications In pack On shelf On display On the go In graphics Packaging Display and Retail ready tray Solutions for food Solutions for solutions for point-of-sale solutions service graphical uses consumer goods solutions Investor presentation 5 1–6/2017 Metsä Board has a broad customer base 50% of Metsä Board’s folding boxboard sales are negotiated directly with brand owners BRAND OWNERS CONVERTERS CORRUGATED BOX MANUFACTURERS MERCHANTS FOLDING BOXBOARD WHITE LINERBOARDS Investor presentation 6 1–6/2017 Metsä Board’s paperboards have many competitive advantages Lightweight • Up to 30% lighter than competing grades (eg SBS, WLC) with at least the same stiffness Purity and safety • Important in food and food service packaging, eg recycled paperboard should not be in direct contact with food products Sustainability • Wood raw material is 100% traceable to sustainably managed northern forests Quality • Excellent printability and runnability Investor presentation 7 1–6/2017 Metsä Board’s folding boxboard has a three-layer structure 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 8 1–6/2017 Strong profitability development 2016 was negatively impacted by Husum’s new FBB machine ramp-up Comparable ROCE-% Comparable EBIT-% Target over 12% 12 11,3 10 9,7 9,0 10,3 10 8,0 9,1 8 8,1 6,8 8 6,4 6 5,2 % 6 % 4 4 2 2 0 0 2013 2014 2015 2016 1-6/2017 2013 2014 2015 2016 1-6/2017 Investor presentation 9 1–6/2017 Strong improvement in productivity over time Capacity tn / employee Personnel Production capacity (tonnes) / employee at current mills 2 000 2 800 1 900 Productivity (capacity) Personnel average 1 800 2 500 1 700 2 200 1 600 1 500 1 900 1 400 1 600 1 300 1 200 1 300 1 100 1 000 1 000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E Investor presentation 10 1–6/2017 High threshold for new producers to enter high-quality paperboard segment • High investment costs • Limited availability of high yield pulp (e.g. BCTMP) • Global brand owners and corrugated box manufacturers 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 11 1–6/2017 Clearly lower capex in 2017 EUR million 180 • Investments in H1 2017 150 were EUR 31 million (H1/16: EUR 103 million) 120 • Estimated capex in FY 2017 90 is EUR 65–70 million 60 30 0 2010 2011 2012 2013 2014 2015 2016 2017E Maintenance capex Growth capex Depreciation Main growth in capex in 2015−2016: Husum investment programme, extrusion coating line Investor presentation and equity investment in Metsä Fibre’s bioproduct mill 12 1–6/2017 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 14 1–6/2017 Strategic cornerstones: 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 15 1–6/2017 Strategic cornerstones: 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 16 1–6/2017 Strategic cornerstones: 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 17 1–6/2017 Financial targets Efficient use of capital and higher profitability through focused growth Comparable ROCE, % Net IB debt / Annual growth in total Comparable EBITDA, % paperboard deliveries, % Target is to exceed 13% 3,4 relevant market growth* Target: > 12% 11,3 12% 2,9 10% 9,1 Target: < 2.5x 8,1 2,0 7% 6,4 1,8 1,2 4,8 4% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 * Global fresh fibre paperboard demand growth 3-4%/a 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 18 1–6/2017 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 19 1–6/2017 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 the financial period 0,40 0,30 • Dividend for 2016: 0,20 – EUR 0.19 per share – Totalling EUR 68 million 0,10 – Corresponds to 76 per cent of EPS 0,00 2012 2013 2014 2015 2016 Earnings per share Dividend per share Investor presentation 20 1–6/2017 Operating environment and market position Global trends driving growth in packaging • Growing consumption • Stronger demand for sustainable packaging • Greater significance of resource efficiency drives circular economy and life-cycle thinking • Increasing regulation brings additional obligations • Social responsibility throughout the value chain 15 2017 CMD Joukio The global paperboard packaging market is about USD 260 billion The total packaging market is USD 840 billion Average annual growth rate of paperboard packaging USD bn 350 300 + 3% p.a. 250 USD Roughly half 260 bn is made of 200 fresh fibres 150 100 50 Paperboard packaging Other wood fibre based packaging 0 Non-fibre based packaging Investor presentation 23 Source: Smithers Pira 1–6/2017 Global cartonboard* market is 36 Mt/a of which folding boxboard market is about 9 Mt/a Avg. growth rate for folding boxboard is 3–4%/a North America 6 Mt/a EMEA 8 Mt/a Folding boxboard APAC 20 Mt/a Other fresh fibre grades (e.g. SBS, CUK) Recycled grades Lat.Am. 2 Mt/a *Excluding liquid packaging board, cup & plate stock, liner and uncoated recycled board. Investor presentation 24 1–6/2017 Source: Metsä Board estimates Global food service board* market is 3.5 Mt/a Avg. growth rate for food service board is 3–5%/a EMEA 0.9 Mt/a Americas Cups 1.6 Mt/a APAC 1.0 Mt/a Plates Cartons * Base board (e.g. SBB or FBB) only, excl. other Investor presentation 25 laminate materials such as aluminium and PE. 1–6/2017 Source: Metsä Board estimates Global white linerboard market is 10.5 Mt/a Global white coated kraftliner market is 1 Mt/a White coated kraftliner EMEA 4,5 Mt /a White uncoated kraftliner Americas White recycled liner 3 Mt/a Americas APAC 3 Mt/a 3 Mt/a Global containerboard market is 155 Mt/a, of which • White linerboards 7% • Brown kraftliner 17% • Brown testliner 37% Investor presentation 26 • Fluting 39% 1–6/2017 Source: Metsä Board estimates Metsä Board has a strong position in Europe Largest Folding Boxboard Largest White Fresh Fibre Linerboard Producers in Europe Producers in Europe Total capacity: 3.7M tonnes Total capacity: 2.2M tonnes Metsä Board 36% Metsä Board 31% Stora Enso 20% Smurfit Kappa 22% Kotkamills Oy 11% Mondi 14% Mayr-Melnhof 9% BillerudKorsnäs 10% International Paper 7% SCA 7% Others 17% Others 15% 0 300 600 900 1200 1500 0 200 400 600 800 Investor presentation Sources: Company information, Pöyry Management Consulting Oy Q2/2017 27 1–6/2017 Market price development in folding boxboard and white-top kraftliner in Europe EUR/ tn 1200 1100 1000 900 800 700 600 500 2009 2010 2011 2012 2013 2014 2015 2016 2017 Folding boxboard White-top kraftliner Investor presentation Sources: RISI, Inc.