Metsä Board Investor presentation 1–9/2017
1 November 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 January–September 2017 Results 43 Production, capacities and sourcing 57 Product development focus areas 63 Sustainability 68 Shares and owners 74 Appendix 78 Contact information 87
Investor presentation 1– 2 9/2017 Investment highlights Sales split in 2016
Metsä Board in brief 10%
15% Folding boxboard • A pure-play paperboard company focused on premium fresh Linerboards fibre paperboards Market pulp Others • Strong market position: 50% – #1 in folding boxboard and white kraftliners in Europe 25% – #1 in coated white kraftliners globally
• A growth company with good profitability Sales split by region in 2016 • Global sales to over 100 countries from eight production units 8 % in Finland and Sweden 17 % • Customers are brand owners, converters, merchants and EMEA manufacturers of corrugated products Americas • Strong fibre know-how and self-sufficiency in pulp APAC
75 %
Investor presentation 4 1–9/2017 Metsä Board’s paperboard offers 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 Solutions for solutions for point-of-sale solutions food service graphical uses consumer goods solutions
Investor presentation 5 1–9/2017 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 1–9/2017 Metsä Board’s paperboards have many competitive advantages
Lightweighting • Metsä Board’s folding boxboard can be up to 30% lighter compared to competing grades (SBS, WLC) Purity and safety of fresh fibre paperboards • Important especially for food and food service packaging • Whiteness and quality - upscale consumer experience Sustainability • Fresh fibres are recyclable and renewable material • Wood raw material is 100% traceable to sustainably managed northern forests • Strong and recognised credentials in environmental performance, water and energy efficiency and actions to combat climate change
Investor presentation 1– 7 9/2017 Three-layer structure makes the board light maintaining the stiffness
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 1–9/2017 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 10,0 10,6 9,0 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 1-9/2017 2013 2014 2015 2016 1-9/2017
Investor presentation 9 1–9/2017 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 1–9/2017 Clearly lower capex in 2017
EUR million 180 • Investments in January– September were EUR 39 million 150 (1–9/16: EUR 119 million) 120 • Estimated capex in 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 11 1–9/2017 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 12 1–9/2017 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 1–9/2017 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 1–9/2017 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 1–9/2017 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 1–9/2017 Financial targets and actuals
Comparable ROCE, % Net debt / Annual growth in total Comparable EBITDA, % paperboard deliveries, %
Target is to exceed relevant market growth* 17% 11,3 Target: >12% 10,6 2,9 13% 12% 9,1 Target: <2.5× 8,1 2,0 10% 6,4 1,8 1,7 7% 1,2
* Global fresh fibre paperboard demand growth 3-4%/a
2013 2014 2015 2016 1-9/17 2013 2014 2015 2016 1-9/17 2013 2014 2015 2016 1-9/17
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 1–9/2017 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 1–9/2017 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 1–9/2017 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
Investor presentation 22 1–9/2017 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 1–9/2017 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 1–9/2017 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. 1–9/2017 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% 1–9/2017 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: 3.6M tonnes Total capacity: 2.1M tonnes
Metsä Board 37% Metsä Board 32% Stora Enso 20% Smurfit Kappa 23% Kotkamills Oy 11% Mondi 15% Mayr-Melnhof 9% BillerudKorsnäs 11% International Paper 7% SCA 8% Others 17% Others 11%
0 300 600 900 1200 1500 0 200 400 600 800
Investor presentation Sources: Company information, Pöyry Management Consulting Oy Q3/2017 27 1–9/2017 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 1–9/2017 1050 1050 1000 1000 950Pulp price development (PIX) 950 900 900 EUR 850 850USD 800 800
750 Softwood, USD 750 700 700 Hardwood, USD 650 Softwood, EUR 650 600 600 550 550
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 1–9/2017 Growth in the paperboard business Metsä Board operates in growing paperboard market Annual global demand growth for folding boxboard and white kraftliners is estimated to be 3–4%
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 (e.g. SBS, CUK) -1 to +1%/a -1 to -2%/a Recycled paperboards (e.g. WLC) -2%/a or more
Source: RISI, CEPI, Pöyry and trade statistics among others
Investor presentation 31 1–9/2017 Metsä Board’s growth clearly exceeds average market growth
Metsä Board’s annual paperboard deliveries, 1,000 tonnes 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 2012 2013 2014 2015 2016 LTM 2018 target Fresh fibre linerboard Folding boxboard
Investor presentation 32 1–9/2017 Most important growth area is Americas
Actual and targeted deliveries to Americas 300 300
250 200 200
150 1,000 tonnes 100
50
0 2011 2012 2013 2014 2015 2016 LTM 2018 target
Folding boxboard Fresh fibre linerboard
Investor presentation 33 1–9/2017 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 1–9/2017 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 1–9/2017 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 1–9/2017 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 1–9/2017 Investment in PE coating
• EUR 38 million investment, capacity of 100,000 t/a • Targeted at food packaging and food service applications • PE-coated (polyethylene) 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 1–9/2017 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 1–9/2017 Update on Husum’s folding boxboard
• Capacity utilisation rate in July–September 2017 was 76% – FY 2017 estimate is slightly below 75% – Target is to have capacity in full use by the end of 2018 • Annual maintenance shutdown in October • Improved average price of folding boxboard • Production costs per tonne are still higher than at the Finnish mills • Metsä Board’s FBB/FSB deliveries to Americas in 1–9/2017 up by 65% compared to corresponding period last year
Investor presentation 41 1–9/2017 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 42 1–9/2017 Result for January−September 2017 January–September 2017: Increasing sales and improved operating result
Sales Comparable operating result EUR million EUR million and % 500 50 10,5 % 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% 436 423 440 422 445 474 479 35 36 34 33 45 44 50 0 0 0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17
1–9 2016: 1–9 2017: 1–9 2016: 1–9 2017: +8% EUR 1,299 million EUR 1,397 million EUR 105 million +33% EUR 139 million
Investor presentation 44 1–9/2017 Strong growth in paperboard deliveries
+17% 500 Q1-Q3 2017
Q1-Q3 2016 400 173 170 148 163 148 143 300 142 141 137 131 130 White fresh fibre linerboard Folding boxboard 200 1,000 tonnes 304 299 250 266 245 265 100 204 213 224 224 227
0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
FY 2015: FY 2016: Q1-Q3 2017: 1,404 tonnes 1,569 tonnes 1,375 tonnes (Q1-3/16: 1,181) Investor presentation 45 1–9/2017 Q3 2017 in summary (vs. Q2 2017)
• Higher production volumes • Increased average price of folding boxboard • Paperboard deliveries roughly at level of Q2 • Cash flow from operations strong due to improved result and good working capital performance • Stable or rising market price levels in local currencies – Metsä Board announced price increases in Europe in FBB and white linerboard • Metsä Fibre’s new bioproduct mill started as planned in August
Investor presentation 46 1–9/2017 FX exposure and sensitivities
• FX rate changes including hedges had a small positive impact in Q3/17 vs. Q2/17 • The positive impact from hedging will start to dilute towards the end of the year • Annual sensitivities have changed due to the changes in FX rates
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 6 %2 % USD Currency Next 12 months SEK USD, $ EUR +64 million 34 % 58 % GBP SEK EUR -38 million
Other GBP, £ EUR +7 million currencies
Investor presentation 47 1–9/2017 Hedging policy: 100% of balance sheet position and 50% of annual net FX flows Return on capital employed, %
18%
16%
14% Target >12% 12%
10% Q3/17: 11.5% 8%
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 Q3/17
Comparable ROCE, % Investor presentation 48 1–9/2017 Cash flows clearly positive Strong cash flow in Q3 due to improved result and good working capital performance
300 250 256 247 250 214 188 193 185 186 200 126 150 119 118 115 108 89 100 78 70 93 98 33 50 66 67 26 68 9 56 8 -15 55 17 1 59 45 8 49 7 37 0 25
EUR million -22 -22 -50 -76 -72 -91 -100 -95 -82 -150 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17
Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months Free cash flow = Net cash flow from operating activities + Investments in intangible and tangible assets + Acquisition of associate company shares + Acquisition of other shares Investor presentation 49 1–9/2017 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% 400 30% 39% 2 40% 32% 1,8 1,7 20% 30% 1,2 200 1 20% 10% 10% 597 427 333 464 437 0 0 0% 0% 2013 2014 2015 2016 9/2017 2013 2014 2015 2016 9/2017 2013 2014 2015 2016 9/2017 Net debt, EUR million Net debt/EBITDA (rolling 12 months)
Investor presentation 50 1–9/2017 Debt structure and liquidity 30 September 2017
Interest-bearing debt, Available liquidity, total EUR 651 million total EUR 412 million
Bonds*) 22 53 Cash and cash Loans from equivalents financial institutions 102 Revolving credit 111 Pension loans facility 315 210 Unraised pension Finance leases and loans other loans 100 149 Other short-term loans
*) Of which EUR 248 million due 2027 and EUR 67 million due 2019
Average maturity of long-term loans on 30 September 2017 was 5.4 years. Investor presentation 51 1–9/2017 Debt maturity lengthened due to new 10-year bond
• Total interest-bearing debt on 30 September was EUR 651 Metsä Board‘s credit ratings million Rating agency Rating and Last update • In September, Metsä Board issued new 10-year EUR 250 million outlook bond with 2.75% annual coupon. At the same time, the company Standard & BB+ (positive) 02/2017 made a tender offer for the old EUR 225 million bond due in Poor‘s 2019 (EUR 158m tendered) Moody‘s Ba1 (stable) 08/2017 • In August, Moody‘s upgraded Metsä Board‘s credit rating from Upgrade from Ba2 Ba2 to Ba1
Interest-bearing debt maturity profile 30.9.2017 250
200
150
100 EUR million 50
0 2017 2018 2019 2020 2021-26 2027
Bonds Loans from financial institutions Pension loans Other loans Investor presentation 52 1–9/2017 Increased financial costs due to the financing arrangements in September
EUR million % 60 5,0 • Net financials in 1-9/2017 4,6 50 were EUR -29 million 4,5 (1-9/16: EUR -21 million) 40 4,2 • Q3 financial expenses include 30 3,8 4,0 EUR 11 million of costs related to the early repurchase of the bond 20 maturing in 2019 3,3 3,5 10 3,2 56 39 32 31 29 0 3,0 2013 2014 2015 2016 1-9/2017
Net financial costs, EUR million Average interest rate at the end of period, %
Investor presentation 53 1–9/2017 Debt programmes 30 September 2017 Metsä Board’s significant debt securities issued and outstanding at 30 September 2017 Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity
EUR 250 million bond issued 2017 250 250 2.8 2027 EUR 225 million bond issued 2014 67 67 4.4 2019 Syndicated credit facility 2014 250 150 3.2 2020 EUR 51 million bilateral loans 51 51 1.4 2017–2020
EUR 22 million finance leases 22 22 2.3 2017–2024
EUR 213 million pension loans 213 111 4.5 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 September 2017 is 3.2%. Metsä Board’s principal long-term liquidity reserves at 30 September 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 4.5 - 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 54 1–9/2017 Near-term outlook
• Metsä Board’s Q4 paperboard delivery volumes are expected to decline due to seasonality. Target is to further increase average price in paperboards • Pulp market is expected to remain in balance. Metsä Fibre’s new bioproduct mill is expected to have positive impact on Metsä Board’s Q4 result • Annual maintenance shutdown in Husum mill in Q4 • Positive hedging impact from USD will dilute towards the year-end • Impacts from price increases expected to be visible mainly from Q1 2018 onwards
Investor presentation 55 1–9/2017 Profit guidance
Mainly due to the maintenance shutdown at the Husum integrated mill, Metsä Board’s comparable operating result in the fourth quarter of 2017 is expected to weaken slightly from the third quarter of 2017.
Investor presentation 56 1–9/2017 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 Husum 270,000 t/a white linerboard 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 1,300,000 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 in 2017 is 400,000 t/a long Investor presentation 58 1–9/2017 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 59 1–9/2017 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 1,300 1,300 Kemi Finland 610 610 Rauma Finland 650 650 Joutseno Finland 690 690 Total 3,250 3,250
Investor presentation 60 1–9/2017 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 61 1–9/2017 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 62 1–9/2017 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 64 1–9/2017 Lighter-weight paperboards: Better with Less
Metsä Board lightweight paperboard
Average FBB – Folding boxboard
SBB – Solid bleached board
WLC – White lined chipboard
Investor presentation 65 1–9/2017 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 66 1–9/2017 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 67 1–9/2017 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 69 1–9/2017 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 71 1–9/2017 Metsä Board is recognised as a global leader in sustainability practices
2017 CDP • Metsä Board chosen to the Water A List and Climate A List • Leadership status on Forest programme • Metsä Board participated on CDP Supply chain programme together with its customers 2017 EcoVadis • Metsä Board achieved the Gold rating for its Corporate Social Responsibility practices by EcoVadis in 2017 • Overall Metsä Board was ranked in the top 1% of suppliers assessed by EcoVadis across all categories
Investor presentation 72 1–9/2017 Increased regulation to ensure product safety
EU Commission – 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 – Concentration limits of certain polyaromatic hydrocarbons micrograms/kg food has been set Draft German mineral oil regulation – 4th ordinance draft published in March 2017 – The draft focuses on mineral oil migration from recycled fibre based packaging materials to food
73 Investor presentation 1–9/2017 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 September 2017 30 September 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 1-9/2017 22 %
Market cap, EUR million * Metsäliitto Cooperative has 61% of voting rights Share of foreign owners, %
Investor presentation 75 1–9/2017 Ownership structure on 30 September 2017
Shares, % Votes, % (total no. of shares 355,512,746) (total no. of votes 1,037,530,115) Metsäliitto Metsäliitto Cooperative 2 % Cooperative 2 % 3 % 3 % 1 % 4 % Foreign owners* Public sector organisations 7 % Households Households 12 % 42 % 11 % Public sector Foreign owners* organisations
61 % 19 % 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. 76 1–9/2017 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, %
77 Investor presentation 1–9/2017 Appendix Metsä Board 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 MG employee since 1990 MG employee since 2000 MG employee since 2007 Share ownership: 261,884 Share ownership: 50,000 Share ownership: 45,740
Harri Pihlajaniemi Ari Kiviranta SVP, Production Susanna Tainio SVP, Development SVP, HR Member of CMT since 2017 Member of CMT since 2014 MG employee in 2001-2004 Member of CMT since 2015 MG employee since 1993 and since 2017 MG employee since 2011 Share ownership: 16,236 Share ownership: no ownership Share ownership: 20,505
Share ownerships are B-shares. Investor presentation 79 MG = Metsä Group 1–9/2017 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 80 1–9/2017 Metsä Fibre’s new 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 81 1–9/2017 Metsä Board’s credit rating
8
BBB- / Baa37 BBB- / Baa3
BB+ / Ba16 BB+ / Ba1
BB / Ba25 BB / Ba2
BB- / Ba34 BB- / Ba3
B+ / B13 B+ / B1
B / B22 B / B2
B- / B31 B- / B3
CCC+ / Caa10 CCC+ / Caa1 1.1.2011 1.1.2012 1.1.2013 1.1.2014 1.1.2015 1.1.2016 1.1.2017 Moody's Standard & Poors Investment Grade
Investor presentation 82 1–9/2017 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
Investor presentation 83 1–9/2017 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 84 PVO 1–9/2017 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 85 1–9/2017 **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 86 1–9/2017 Contact information
Katri Sundström Vice President, Investor relations
Tel +358 400 976 333 [email protected] www.metsaboard.com
Investor presentation 87 1–9/2017