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. & FOEX Indexes Ltd 28 1–6/2017 1050 1050 1000 1000 950Pulp price development (PIX) 950 900 900 EUR 850 850USD 800 800 Softwood, USD 750 750 700 700 Hardwood, USD 650 650 Softwood, EUR 600 600 550 550
500 Hardwood, EUR 500 450 450 400 400 350 350 '10 '11 '12 '13 '14 '15 '16 '17
Investor presentation Source: Foex Indexes Ltd 29 1–6/2017 Growth in the paperboard business Globally growing paperboard market
PAPERBOARD 5-YEAR GROWTH FORECAST EMEA Americas APAC
Folding boxboard (FBB)
Food service board (FSB)
Coated white kraftliner n/a
Uncoated white kraftliner n/a +2%/a or more
+1 to +2%/a
Other fresh fibre paperboards (eg SBS, CUK) -1 to +1%/a
-1 to -2%/a Recycled paperboards (eg WLC) -2%/a or more
Source: Metsä Board‘s own estimate
Investor presentation 31 1–6/2017 Metsä Board’s growth exceeds clearly the average market growth
Metsä Board’s annual paperboard deliveries, 1,000 tonnes 2 000
1 750
1 500
1 250
1 000
750
500
250
0 2012 2013 2014 2015 2016 2018 target
Investor presentation Fresh fibre linerboard Folding boxboard 32 1–6/2017 Most important growth area is Americas
Actual and targeted deliveries to Americas 300 300 250 250
200
150 1,000 tonnes
100
50
0 2011 2012 2013 2014 2015 2016 2018 target
Folding boxboard Fresh fibre linerboard
Investor presentation 33 1–6/2017 Metsä Board's regional goals
GROWTH MAINTAIN FOCUS ON IN THE THE STRONG PREMIUM AMERICAS MARKET PAPERBOARD IN THE COMING POSITION IN SEGMENTS IN YEARS EUROPE THE ASIA-PACIFIC REGION
AMERICAS EMEA APAC SHARE OF SALES IN 2016 SHARE OF SALES IN 2016 SHARE OF SALES IN 2016 17% 75% 8%
Investor presentation 34 1–6/2017 Metsä Board's growth drivers in Europe
EUROPE • A leading market position with GROWTH MAINTAIN strong,FOCUS long-lasting ON customer IN THE THE STRONG relationshipsPREMIUM – especially with AMERICAS MARKET brandPAPERBOARD owners IN THE COMING POSITION IN SEGMENTS IN YEARS EUROPE • SafetyTHE is increasingASIA-PACIFIC significance in foodREGION packaging • Paperboard is a strong alternative to plastics and aluminium AMERICAS EMEA • GrowingAPAC e-commerce SHARE OF SALES IN 2016 SHARE OF SALES IN 2016 increasingSHARE OF demand SALES IN 2016 for high-end 17% 75% white-top8 % kraftliners
Investor presentation 35 1–6/2017 Metsä Board's growth drivers in Americas
GROWTH MAINTAIN FOCUS ON IN THE THE STRONG PREMIUM AMERICAS AMERICASMARKET PAPERBOARD IN THE COMING •POSITION Local production IN not able to meet risingSEGMENTS trend of IN YEARS EUROPElightweighting THE ASIA-PACIFIC REGION • Non-integrated converters looking for alternative board suppliers • Paperboard a strong alternative to plastics – especially in food service applications AMERICAS EMEA APAC SHARE OF SALES IN 2016 •SHARE Growing OF SALES e-commerce IN 2016 increasing demandSHARE OF for SALES IN 2016 17% 75high-end % white-top kraftliners 8 %
Investor presentation 36 1–6/2017 Husum investment programme and update Husum investment programme
• Launched at the end of 2014 • Two paper machines closed in 2015 • One paper machine converted to produce linerboard (BM2) • New folding boxboard machine (BM1) started up in February 2016 • Enhancements to the pulp mill and the mill site’s own port • New extrusion coating line started up in April 2017
Folding boxboard production Linerboard production
• Capacity approximately 400,000 t/a • Capacity approximately 270,000 t/a • Deliveries mainly to Americas and • Deliveries to Europe and Americas food service globally
Investor presentation 38 1–6/2017 Investment in PE coating
• EUR 38 million investment, capacity of 100,000 t/a • Targeted at food packaging and food service applications • PE-coated* paperboard is an alternative to plastics and the mainstream barrier solution today • PE fulfills important barrier requirements: – Good water and moisture barrier – Grease barrier (short time e.g. for food service) – Good heat sealing properties • Husum PE coating line utilises latest technology and benefits from a fully integrated production site • Supports growth in a new customer segment
Investor presentation 39 1–6/2017 The integrated mill model improves efficiency and sustainability of the supply chain Husum integrated mill: Raw material • Certified wood resources
RawPulp material • Own pulp mill at the mill site
RawPaperboard material • Paperboard production (BM1)
RawExtrusion material • Extrusion coating line (EM1)
RawLogistics material • Own deep water port
Investor presentation 40 1–6/2017 Targeted sales and sales split for new paperboard volume from Husum mill
Incremental capacity A total of 400,000 tonnes in linerboard*) of new FBB capacity
2 000 150 150 1 500 250
1 000 1,000 tonnes
500
0 Deliveries in 2015 Folding boxboard to Food service board Linerboard to Targeted deliveries Americas globally Europe and in 2018 Americas
Investor presentation 41 1–6/2017 *) Until July 2016 the paperboard machine (BM2) produced simultaneously fine paper reels. Husum folding boxboard update post H1/2017
• Capacity utilisation rate in FBB during H1 2017 was 70% – In June, both production and deliveries were over 85% of monthly capacity – The target of having the capacity in full use by end of 2018 is intact • Production costs per tonne produced still higher compared to Finnish mills • Geographical sales mix burdened the average price in FBB • Deliveries of own PE-coated paperboards to customers have started
Investor presentation 42 1–6/2017 Potential to improve profitability of Husum At least EUR 100 million EBIT improvement from 2016 to 2019
120,000 Restructuring: FBB capacity tonnes utilisation rate of pulp Efficiency >95% with 2016 production improvement normal sales 2019 lost in 2016 programme price
+ EUR + EUR + EUR 25 million 5 million >70 million
Investor presentation 43 1–6/2017 Result for January−June 2017 Q2 2017 in summary
• Good demand for high-quality paperboards continued • Stable or rising market price levels • Metsä Board’s paperboard deliveries up by 11% from Q1 2017 • The average price of folding boxboard was burdened by Husum’s geographic sales mix • Steady working capital despite the strong sales growth • New extrusion coating line in Husum started up
Investor presentation 45 1–6/2017 Key financials
Change Change Q2/17 Q1/17 Q2/17 H1/17 H1/16 H1/17 2016 vs. Q1/17 vs. H1/16 Sales EUR, m 474 445 +7% 919 859 +7% 1,720 EBITDA* EUR, m 68 69 -1% 136 119 +14% 231 Operating result* EUR, m 44 45 -2% 89 71 +25% 138 % of sales % 9.2 10.2 9.7 8.2 8.0 Result before taxes* EUR, m 37 40 -8% 77 57 +35% 107 Earnings per share EUR 0.09 0.10 -10% 0.19 0.13 +46% 0.25 ROCE* % 10.3 10.6 10.3 8.4 8.1 Capex EUR, m 12 19 -37% 31 103 -70% 162 Cash flow from operations EUR, m 37 26 +42% 63 -45 77
IB Net debt, at end of period EUR, m 495 458 +8% 495 541 -9% 464 *comparable
Investor presentation 46 1–6/2017 All-time high in paperboard deliveries
Folding boxboard White fresh fibre linerboard 500
400 173 148 163 Growth in total paperboard 148 143 300 142 deliveries: 141 137 131 130 +11% Q2/17 vs. Q1/17 200 +18% H1/17 vs. H1/16 1,000 tonnes 304 250 266 245 265 +12% FY16 vs. FY15 100 204 213 224 224 227
0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
FY 2015: FY 2016: Investor presentation 1.4m tonnes 1.6m tonnes 47 1–6/2017 Sales and operating result
Sales Comparable operating result EUR million EUR million and % 500 50 12% 10,2 % 9,2 % 10% 400 40 8,5 % 8,0 % 7,7 % 7,8 % 8% 300 30 6% EUR million EUR million 200 20 4%
100 10 2% 436 423 440 422 445 474 35 36 34 33 45 44 0 0 0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
H1 2016: +7% H1 2017: H1 2016: +25% H1 2017: EUR 859 million EUR 919 million EUR 71 million EUR 89 million
Investor presentation 48 1–6/2017 Impacts on operating result Q2 2017 vs. Q1 2017 and H1 2017 vs. H1 2016
Comparable operating result, EUR million Comparable operating result, EUR million Q2 2017 vs. Q1 2017 H1 2017 vs. H1 2016 89 50 45 44 90 80 71 40 70 60 30 50 EBIT-% EBIT-% EBIT-% 40 EBIT-% 20 9.2 30 9.7 10.2 8.2 10 20 10 0 0 Q1 2017 Q2 2017 H1 2016 H1 2017 Growing delivery volumes in paperboard + Positive development at Finnish paperboard + and positive development in market pulp mills and in market pulp, positive impact from FX rates including hedges - Geographic sales mix of Husum’s FBB and product mix of Husum’s white linerboards, - Increased latex price maintenance at Finnish mills
WTKL = white-top kraftliner Investor presentation 49 1–6/2017 FBB = folding boxboard Return on capital employed, %
18%
16%
14% Target >12% 12%
10% Q2/17: 8% 10.3%
6%
4%
2%
0% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
Comparable ROCE, % Investor presentation 50 1–6/2017 Cash flows clearly positive Working capital remained nearly unchanged despite the strong growth in Q2
300 250 256 247 250 214 188 193 185 200
150 126 119 118 115 89 100 78 70 93 98 23 EUR million 50 33 66 67 26 56 49 55 17 9845 8 -15 7 37 0 25 -50 -22 -22 -69 -50 -76 -60 -100 -73 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17
Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months Investor presentation 51 1–6/2017 Stable balance sheet
Interest-bearing net debt / 3,0 Net gearing, % comparable EBITDA 600 600 54% 0,6 Financial target: <2.5x 2,0 2,1 2,1 49% 2,0 2,0 45% 1,9 44% 44% 44% 0,5 2,0
400 0,4 400 32% 1,2 0,3 1,0 200 0,2 200
0,1 333 464 541 488 464 458 495 333 464 541 488 464 458 495 0 0 0 0,0 2015 2016 6/16 9/16 12/16 3/17 6/17 2015 2016 6/16 9/16 12/16 3/17 6/17
Interest-bearing net debt, EUR million Interest-bearing net debt, EUR million Net gearing, % Interest-bearing net debt / EBITDA (rolling 12-month)
Investor presentation 52 1–6/2017 Near-term outlook
• Price levels in FBB are expected to be stable, several linerboard producers have announced price increases. Pulp market expected to remain in balance • Metsä Board’s Q3 paperboard delivery volumes are expected to stay flat compared to Q2 • Focus on improving the geographic sales mix in Husum’s folding boxboard and increase the share of North American sales, in particular • Start-up phase of Metsä Fibre’s new bioproduct mill in August is expected to have only a minor negative impact on Metsä Board’s result
Investor presentation 53 1–6/2017 Profit guidance
Metsä Board's comparable operating result for the third quarter of 2017 is expected to improve slightly compared to the second quarter of 2017.
Investor presentation 54 1–6/2017 Balance sheet and financing Strong balance sheet
Equity ratio, % Net gearing, % Net debt, EUR million and Net debt / Comparable EBITDA 51% 4 48% 80% 50% 46% 70% 70% 600 41% 3 40% 39% 60% 2,9 51% 2,0 50% 44% 45% 400 30% 2,0 2 40% 32% 1,8 20% 30% 1,2 200 1 20% 10% 10% 597 427 333 464 495 0 0 0% 0% 2013 2014 2015 2016 6/2017 2013 2014 2015 2016 6/2017 2013 2014 2015 2016 6/2017 Net debt, EUR million Net debt/EBITDA (rolling 12 months)
Investor presentation 56 1–6/2017 Debt structure and liquidity 30 June 2017
Interest-bearing debt, Available liquidity, total EUR 640 million total EUR 343 million
Bonds
Cash and cash 134 Loans from 141 equivalents financial institutions 223 Revolving credit Pension loans 102 facility 23 Unraised pension Finance leases and loans other loans 111 149 Other short-term loans 100
Average maturity of long-term loans on 30 June 2017 was 2.0 years. Investor presentation 57 1–6/2017 Maturity schedule in long-term IB debt
Long-term interest-bearing debt (total EUR 558 million) and committed undrawn credit facilities 30 June 2017 EUR million 300 258 250
200 174
150 100 102 100 82
42 50 1 2 0 2017 2018 2019 2020 2021 >2021
Long-term interest bearing liabilities Committed undrawn credit facilities
Investor presentation 58 1–6/2017 Debt programmes 30 June 2017 Metsä Board’s significant debt securities issued and outstanding at 30 June 2017 Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity
EUR 225 million bond Issue 2014 225 225 4.5 2019 Syndicated credit facility 2014 250 150 3.2 2020 EUR 51 million bilateral loans 51 51 1.4 2017–2020
EUR 23 million finance leases 23 23 2.3 2017–2024
EUR 213 million pension loans 213 111 4.6 2017–2020
*) The average interest rate take into account outstanding interest rate swaps and amortised arrangement fees. The average interest rate of all Metsä Board interest bearing net liabilities incl. interest rate derivatives per 30 June 2017 is 3.3%.
Metsä Board’s principal long-term liquidity reserves at 30 June 2017 Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity Revolving credit facility 2014 100 0 - 2020 Pension loan facilities 213 111 4.6 - Short-term funding programmes
Metsä Group internal short-term limit 150 0 - 0–12 months
Metsä Group Treasury funding programmes
EUR 150 million domestic CP programme 150 0 - 0–12 months
Investor presentation 59 1–6/2017 Steadily decreasing net financial costs
EUR million % 60 5,0 • Net financials in H1 2017 4,6 were EUR -12 million 50 4,5 (H1/16: EUR -14 million) 40 4,2 • Net exchange gains and
30 3,8 4,0 losses in H1 amounted to EUR -0.6 million (EUR -0.3 20 3,3 3,3 3,5 million) 10 56 39 32 31 12 0 3,0 2013 2014 2015 2016 H1/2017
Net financial costs, EUR million Average interest rate at the end of period, % Investor presentation 60 1–6/2017 FX exposure and sensitivities
Impact of FX rate changes including hedges – Q2 2017 vs. Q1 2017: EUR -1.5 million – H1 2017 vs. H1 2016: EUR 11 million
Annual transaction exposure FX sensitivities excluding hedges EUR 1.1 billion 10% strengthening of foreign currency vs. EUR will have an impact on Metsä Board’s EBIT of 5 %2 % USD Currency Next 12 months SEK 35 % 58 % USD, $ EUR +70 million GBP SEK EUR -40 million Other currencies GBP, £ EUR +7 million
Investor presentation 61 1–6/2017 Hedging policy: 100% of balance sheet position and 50% of annual net FX flows Metsä Board 's credit rating Positive BB+ | Ba1 Stable BB | Ba2 Standard & Poor’s Moody’s BB- | Ba3
B+ | B1
B | B2
B- | B3
CCC+ | Caa1
CCC | Caa2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Investor presentation 62 1–6/2017 Production, capacities and sourcing Metsä Board’s production units
Integrated mills Non-integrated mills Kemi • Husum, Sweden • Kyro (Kyröskoski)
400,000 t/a folding boxboard 190,000 t/a folding boxboard Äänekoski 270,000 t/a white linerboard Husum Kaskinen • Simpele Simpele 730,000 t/a chemical pulp Tako 280,000 t/a folding boxboard Joutseno • Kemi Kyro • Tako (Tampere) 410,000 t/a white linerboard 620,000 t/a chemical pulp by Metsä Fibre 210,000 t/a folding boxboard • Äänekoski • Kaskinen 240,000 t/a folding boxboard 340,000 t/a BCTMP 530,000 t/a chemical pulp by Metsä Fibre • Joutseno 320,000 t/a BCTMP Taking into account Metsä Group‘s pulp 690,000 t/a chemical pulp by Metsä Fibre production, Metsä Board‘s pulp balance is 400,000 t/a long Investor presentation 64 1–6/2017 Paperboard capacity
Folding White fresh Town Country Machines Total boxboard fibre linerboard
Tampere (Tako) Finland 2 210 210
Kyröskoski (Kyro) Finland 1 190 190
Äänekoski Finland 1 240 240
Simpele Finland 1 280 280
Kemi Finland 1 410 410
Husum Sweden 2 400 270 670
Total 8 1,320 680 2,000
Investor presentation 65 1–6/2017 Pulp capacity
Metsä Board pulp mills Country Chemical pulp BCTMP Total
Husum Sweden 730 730 Joutseno Finland 320 320 Kaskinen Finland 340 340 Total 730 660 1,390
Metsä Fibre pulp mills Country Chemical pulp BCTMP Total
Äänekoski Finland 530 530 Kemi Finland 610 610 Rauma Finland 650 650 Joutseno Finland 690 690 Total 2,480 2,480
Investor presentation 66 1–6/2017 Deliveries by region in 2016
Folding boxboard Fresh fibre linerboard
11% 1%
16% 32% 48% 60% 7% 25% Western Europe
Eastern Europe
Americas
Asia and Pacific Investor presentation 67 1–6/2017 Sourcing 2016
Electricity sourcing Primary energy used Wood sourcing by country (total 2,438 GWh) (total 12.0 TWh) (total 4.6 million cubic metres)
Outsourced Peat generation Coal 2% Oil 3% 2% 2% Russia Own Hydro 13% generation 4% 20% Gas 7% Sweden Purchased Baltic countries 38% energy 18 % 45% Wood- Nuclear based power 60% 22% Through PVO shareholding 32% Finland 31%
Investor presentation 68 1–6/2017 Product development focus areas Key product development focus areas
Improved BCTMP Sustainable Microfibrillated cellulose (MFC) lightweighting Strength additives
PE extrusion coated products Barrier board Dispersion barriers Bio-based raw materials
Investor presentation 70 1–6/2017 Lighter-weight paperboards: Better with Less
Metsä Board lightweight paperboard
Average FBB – Folding boxboard
SBB – Solid bleached board
WLC – White lined chipboard
Investor presentation 71 1–6/2017 Metsä Board Barrier boards roadmap
Bio based Bio based barrier light barrier Bio based barrier
Outsourced PE Own PE extrusion extrusion coating coating Non bio-based barrier 2016 2017 Investor presentation 72 1–6/2017 Barrier boards types
BIODEGRADABLE
Bio based,
Oil based, NON-RENEWABLE bio-degradable bio-degradable coating, i.e. starch, coating PLA etc.
Latex based Metsä Board’s
RENEWABLE RENEWABLE dispersion coating Bioplastic coating, baseboard is i.e. green PE PE extrusion bio based, bio- coating degradable and compostable. NON-BIODEGRADABLE
Investor presentation 73 1–6/2017 Sustainability The circular economy of a durable and safe package
Fresh fibre is a pure and safe, renewable We only use carefully selected and raw material. safe raw materials in our products.
Our paperboards are recyclable and biodegradable, or they can be used for energy production. We follow good manufacturing principles Pure paperboard (GMP). helps to store the packaged product safely. All of our products meet the requirements of relevant Durable paperboard protects international legislation. the packaged product effectively.
Investor presentation 75 1–6/2017 Metsä Board uses water efficiently
Rain waters the forest Metsä Board has decreased its CO2 emissions by 45% since 2009 and the use of water by 14% since 2010
Also lakes and seas are 99% of water used in the production a source of recreation process is returned back to the waterways
Forests are a source of recreation
Metsä Board’s board Waste waters are always carefully cleaned production is mostly before returned back to the waterways integrated in pulp production Light weight boards are resource efficient both for us as well as for our customers
Bark is utilised as a bio-energy source Metsä Board only uses surface water Metsä Board’s paperboards can be recycled, in its production depending upon local recycling services Metsä Board’s sustainability targets
WOOD WELL-BEING CLIMATE
THE SHARE OF >80% SICKNESS ABSENTEEISM <3% FOSSIL CO2 EMISSIONS -30% CERTIFIED WOOD PER PRODUCT TONNE PERFORMANCE 2016 4.1% 2009−2020 PERFORMANCE 2016 81% PERFORMANCE 2016 -45% BIOENERGY SHARE OF TOTAL PURCHASED ENERGY 51%
LOGISTICS SAFETY AT WORK ENERGY RESOURCE EFFICIENCY LOST-TIME ACCIDENTS ENSURE THE -10% ENERGY EFFICIENCY 12% PROCESS WATER USE PER -17% FREQUENCY ANNUALLY SUSTAINAINABILITY OF IMPROVEMENT PRODUCT TONNE MAIN LOGISTIC FLOWS 2009−2020 2010−2020 PERFORMANCE 2016 -18.9% PERFORMANCE 2016−2017 PERFORMANCE 2016 7.8% PERFORMANCE 2016 -14% 100%
Investor presentation 77 1–6/2017 Metsä Board scored again high in CDP in 2016
• CDP Water A List – For the second year in a row Metsä Board was globally the only forest company chosen to the A List • CDP Climate A List – Only 9% of the companies were chosen on the list • CDP Forest programme – Leadership status • CDP Supply chain programme – Metsä Board participates together with its customers – L’Oréal nominated Metsä Board to its best performer as packaging material supplier in 2015
Investor presentation 78 1–6/2017 Increased regulation to ensure product safety
EU Commission – In December 2016, announced plans to regulate printed food contact materials (FCMs) on EU level Food Contact Material legislation in Switzerland – Part of Swiss Food law – Recycled paper cannot be used as FCM, if direct contact with food products (exceptions for example eggs) – No regulation of mineral oil but concentration limits of certain polyaromatic hydrocarbons micrograms/kg food has been set Draft German mineral oil regulation – 4th ordinance draft was published in March 2017 – The draft focuses on mineral oil migration from recycled fibre based packaging materials to food – EU notification is expected to start during autumn 2017
79 Investor presentation 1–6/2017 Shares and owners Market cap and ownership distribution Metsä Board shares (METSB, METSA) are listed on Nasdaq Helsinki
Market cap and foreign owners Ownership distribution 30 June 2017 30 June 2017
EUR million % 2 500 24
2 000 20 18 % Metsäliitto 16 * 1 500 Cooperative 12 42 % Domestic institutional 1 000 investors 8 18 % Domestic private investors 500 4 Foreign owners 0 0 2012 2013 2014 2015 2016 1-6/2017 22 %
Market cap, EUR million * Metsäliitto Cooperative has 61% of voting rights Share of foreign owners, %
Investor presentation 81 1–6/2017 Ownership structure on 30 June 2017
Shares, % Votes, % (total no. of shares 355,512,746) (total no. of votes 1,037,530,115) Metsäliitto Metsäliitto Cooperative 1 % Cooperative 3 % 2 % 4 % 1 % 4 % Foreign owners* Public sector organisations 7 % Households Households 13 % 42 % 11 % Public sector Foreign owners* organisations
61 % 18 % Finance and 15 % Non-profit insurance organisations companies Non-profit Finance and 18 % organisations insurance companies
Other companies Other companies * incl. nominee registered
Investor presentation Metsä Board has two series of shares: 35,886,682 A-shares and 319,626,064 B-shares. 82 1–6/2017 A-share entitles to 20 votes and B-share entitle to 1 vote at a General Meeting. Transformation has increased shareholder value
Enterprise value, EUR million Dividend and payout ratio %
EUR mill. EUR 3000 0,20 90 %
75 % 2500 0,16
2000 60 % 0,12 1500 45 % 0,08 1000 30 % 0,04 500 15 %
0 0,00 0 % 2008 2009 2010 2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Net debt Market capitalization Dividend, EUR Dividend/EPS, %
83 Investor presentation 1–6/2017 Appendix Corporate Management Team
Mika Joukio Jussi Noponen Sari Pajari CEO CFO SVP, Marketing and Sales
Chairman of CMT since 2014 Member of CMT since 2016 Member of CMT since 2011 Share ownership 261,884 Share ownership: 50,000 Share ownership: 45,740
Harri Pihlajaniemi was Ari Kiviranta Susanna Tainio appointed SVP, Production, SVP, Development SVP, HR and a member of the Corporate Management Team on 6 June 2017. He will start by 6 Member of CMT since 2014 Member of CMT since 2015 Share ownership: 16,236 Share ownership 20,505 September 2017 at the latest.
Share ownerships are B-shares
Investor presentation 85 1–6/2017 METSÄ GROUP | Sales EUR 4.7 billion | Personnel 9,300
METSÄLIITTO COOPERATIVE | Group’s parent company | Owned by 104,000 Finnish forest owners
METSÄ FOREST METSÄ TISSUE METSÄ WOOD METSÄ BOARD METSÄ FIBRE Wood Supply Tissue and Wood Paperboard Pulp and Sawn and Forest cooking Products Timber Services papers
Sales: Sales: Sales: Sales: Sales: EUR 1.5 billion EUR 1.0 billion EUR 0.5 billion EUR 1.7 billion EUR 1.6 billion Personnel: Personnel: Personnel: Personnel: Personnel: 860 2,700 1,520 2,500 1,230
Metsäliitto Cooperative Metsäliitto Cooperative Metsäliitto Cooperative Metsäliitto Cooperative Metsäliitto Cooperative holding 100% holding 100% holding 100% holding 42%, 61% of votes holding 50.2%, Metsä Board 24.9%, Itochu Corporation 24.9%
Investor presentation 86 1–6/2017 Metsä Board’s associated company Metsä Fibre builds a Bioproduct Mill
INVESTMENT, EUR WOOD USAGE, m3/a CERTIFIED WOOD 1.2 billion 6.5 million 90 percent
CAPACITY, tonnes/a METSÄ BOARD INVESTED EUR 24.9 MILLION IN EQUITY → COMPANY’S PULP BALANCE 1.3 million WILL GROW BY 200,000 TONNES/A.
ELECTRICITY, Wh/a ELECTRICITY SELF START UP SUFFICIENCY 1.8 tera 240 percent August 2017
Investor presentation 87 1–6/2017 Restructuring to a pure-play paperboard company from 2005 onwards
‒ From 26 to 8 production units ‒ Paper capacity from 5 million tonnes to zero ‒ Paperboard capacity from 1.1 million tonnes to 2.0 million tonnes ‒ Major divestments incl. Graphic Papers and Map Merchants ‒ Paperboard (incl. market pulp) 100% of sales from 2017 onwards ‒ Major improvement in profitability and financial position
Today strong position and growing ‒ #1 producer of folding boxboard in Europe ‒ #1 producer of coated white-top kraftliner globally ‒ Husum investment programme enabling significant growth steps
88 Investor presentation 1–6/2017 M&A activity 1997-2015
Acquisitions
Biberist Paper Mill Modo Paper
Simpele Mill Kemiart UK Paper Zanders Liners (53 %)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Alizay Map Rest of Chemicals Botnia Corrugated PSM Graphic Part of mill Lielahti MD Papier Albbruck Metsä Savon Reflex Reflex Business Wood Packaging 8% in 9% in Papers real estate Tissue Sellu New Botnia Botnia Thames Hallein Gohrsmühle MB Divestments mill mill Uruguay Forestia Carton 0.5% in plants 100 000 B2 PVO shares in Investor presentation 7.3 % in Metsä Fibre 89 PVO 1–6/2017 Significant Divestments EUR 3.7 billion in assets divested since 2001
Year Divestiture Enterprise Value, EUR million 2015 Gohrsmühle mill in Germany neg. 2014 Lielahti real-estate 32 2013 Alizay property and other estates 22 2012 7.3% stake in Metsä Fibre 138 2012 0.5% stake in PVO 64 2011 Hallein 34 2009 Metsä-Botnia’s Uruguayan operations 300* 2008 Graphic Papers 750 2008 100,000 shares in PVO 80 2008 New Thames mill 82** 2007 Map Merchant Group 382 2007 Folding carton plants 60 2007 Botnia (9%) 240 2005 Botnia (8%) 164 2005 Savon Sellu 20 2005 Forestia (95%) 163 2004 Metsä Tissue 570 2002 Papierfabrik Albbruck 235 2001 MD Papier 300 2001 Noviant (19%) 41 3,679
* Cash portion Investor presentation 90 1–6/2017 **Incl. pension liabilities Sales and EBIT-% development
% 6000 9,0 9,0 8,0 5000 7,0 6,6 6,8 5,0 4000 5,2 3,6 3,0 3000 2,4 1,0 0,8 1,1 2000 ‐1,0 ‐3,0 ‐1,1 1000 ‐6,2 ‐5,0 5624 4440 3236 2432 2605 2485 2108 2019 2008 2008 1720 0 ‐7,0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales, EUR million Comparable EBIT‐%
Investor presentation 91 1–6/2017 Contact information
Katri Sundström Vice President, Investor relations
Tel +358 400 976 333 [email protected] www.metsaboard.com
Investor presentation 92 1–6/2017