investor presentation 3q 2014 - metsä board · investor presentation 3q 2014 10.12. 2014. metsä...

Metsä GroupMetsä Board

Investor Presentation 3Q 2014

10.12. 2014

Metsä GroupMetsä Board2

Content

Investment highlights and update3 Investment Highlights4 Financial Targets and Dividend9 Strategy21 Final Steps of Transformation37 3Q 2014 Results & Outlook46 Price Development49 Investments

Funding and debt information52 Divestments53 Funding and Debt60 Credit Facilities61 Rating History

General presentation63 General Info73 Operations79 Deliveries81 Sourcing89 Sustainability95 Owners97 Market Positions


Key Investment Highlights of the Renewed Metsä Board

‒ Final steps in transformation to a paperboard company in process

‒ Strong growing core in high-quality paperboards‒ European market leader in folding boxboard and global market leader in coated white top kraftliner‒ Good growth outlook, especially in North America

‒ Best in class profitability and efficient operations due to strong productivity improvements in recent years

‒ Good cash flow generation and solid balance sheet

‒ Technology leader in the core segments with well invested asset base

3


Financial Targets and Dividend


Financial Targets

‒ ROCE target set at a minimum of 10% on average over the business cycle

‒ Net gearing not to exceed 100%

Minimum ROCE 10%* Maximum net gearing 100%

* Excluding non-recurring items

184%

119%137%

82%95%

126%99%90%84%83%

106%

72%57%

70%83%

145%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

3Q14

Maximum level of 100%

13,5%

6,2%2,8%

-0,5%

-5,6%

7,6%

3,4%4,8%6,4%

8,9%

1,6% 0,9%2,1%0,5%

10,2%7,6%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

1-3Q

14Minimum target of 10%

5


Main Priorities and Actions to Exceed ROCE 10 %

6

‒ Grow profitably the paperboard businesses globally

‒ Exit underperforming paper businesses

‒ Secure good price levels

‒ Further improve best in class product quality and supply chain

‒ Develop new products for existing and new end uses

‒ Continue productivity improvements and cost savings


Dividend Policy

- The Company remains committed to an attractive and competitive dividend

- Metsä Board's dividend policy is stable and rewarding to shareholders, and aims at paying a dividend of at least 1/3 of the Company's EPS on average over the business cycle, nonetheless taking into account the Company's net gearing target

7


0,50

1,09 1,13

1,85

0,460,30

-0,79

-1,58

-1,09

-0,83

0,520,26 0,37 0,38

0,51 0,51 0,510,25 0,00 0,00 0,00 0,090,190,23

-0,43 -0,25

-1,21

-0,59

0,090,120,120,140,06 0,06 0,060,00

3,0% 3,4%

7,2%

8,6%6,9%

5,5%5,6%

4,1%3,3% 2,8%

2,1%1,4% 1,3%

0,0%

4,3%

0,0%0,0% 0,0%

-2

-1,5

-1

-0,5

0

0,5

1

1,5

2

2,5

3

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

€ pe

r sha

re

-8 %

-6 %

-4 %

-2 %

0 %

2 %

4 %

6 %

8 %

10 %

12 %

Div

iden

d yi

eld,

%

Earnings per share Dividend per share Dividend yieldDividend yield calculated from annual average B-share volume weighted price

Dividend Yield

8


Strategy


Consistent Strategy

10

‒ Paperboard is Metsä Board’s core business‒ Focus on high-quality paperboards

‒ Reduced exposure in paper business

‒ Extensive fibre know-how and pulp self-sufficiency

‒ Continuous development towards Super Productivity


Packaging Materials Is about EUR 600 Billion Business Globally and It Is Growing Strong

Wood fibre based

materials36 %

Others64 %

‒ Growing population

‒ Urbanization

‒ Environmental awareness

‒ Safety

Source: Smithers Pira

11

Highest growth inpaperboard packaging, accounting

for the largest share of the total


Metsä Board’s Paperboards Are Excellent Results of Successful Product Development

‒ Pure and safe

‒ Even over 30 % lighter in weight than other paperboards

‒ Superior printing surface

12

Recycled fibre based cartonboard

Average FBB

SBB (Solid Bleached Board)

Metsä Board FBB


Metsä Board’s High-Quality Paperboards Help the World’s Leading Consumer Goods Companies to Succeed

‒ Increasing sales

‒ Improving sustainability

‒ Securing product safety

‒ Decreasing costs

13

Lower quality recycled fibre paperboards

Metsä Board’s grades’ global demand growth 3-4 %/a

Recycled and fresh forest fibre based cartonboards

and linerboards

High-quality fresh forest fibre cartonboards

and linerboards


Profitability of Metsä Board’s Core Business Is the Best in Its Field

Operating result, excl. non-recurring items, % of sales


As the FBB Market Leader Metsä Board Continues Steady Organic Growth and Responsible Pricing in the Domestic Markets in Europe

‒ Metsä Board continues to offer an ecological, safe and cost competitive option for brand owners to replace plastics and recycled fibre board

‒ Totally new business in food service and cup stock end uses‒ Large and fast growing segment

‒ Best-in class customer service concept‒ New advanced supply chain model‒ Good technical service

‒ Healthy price levels a key priority for Metsä Board also in the future

15

Sources: Smithers Pira & Metsä Board

Total cartonboard market 7 million t/aDemand growth 2 %/a

WLC 50%FBB 35%SBS 7%CUK 8%


Metsä Board Continues Good Growth in the Highest Quality Segment in Asia. Timing not Good for Aggressive Growth

‒ Metsä Board is the cartonboard quality benchmark in Asia

‒ Responsible consumer goods companies promote good packaging

‒ Sustainability‒ Traceable raw materials‒ Product safety

‒ Leading Chinese producers not in general targeting the highest quality segment

‒ Fast demand growth in commodity segment‒ Lack of high quality raw material

‒ Metsä Board continues to grow in Chinese high quality segment and increases activities in other main Asian markets

16

Sources: Metsä Board & Risi

Total cartonboard market 15 million t/aDemand growth 5%/a

WLC 73%FBB 22%Others 5%


Metsä Board Offers a Sustainable, Safe and Cost-Competitive Option for Consumer Goods Companies in North America

‒ Sustainability and safety increasingly important also for North American brand owners

‒ Consumption mainly in conventional heavy cartonboards

‒ Four leading cartonboard producers dominate US market and most of them are integrated to converting‒ Product development has not been in focus ‒ No investments in new technology and capacity‒ Difficult position for independent non-integrated converters

‒ Timing is perfect for Metsä Board to become a strong long-term partner for local brand owners and converters ‒ Metsä Board’s FBB even over 30% lighter in weight‒ Customer service ability as good as best local players’

17

Sources: Smithers Pira & Metsä Board

Total cartonboard market 6,5 million t/aDemand growth 1 %/a

WLC 34%SBS 34%CUK 27%FBB 5%


In Addition to Folding Boxboard Metsä Board Develops Strongly and Successfully Its Linerboard Business

‒ Successful transformation of Kemi mill to high end doublecoated segment‒ Profitability to a totally new level‒ Fully booked for several years

‒ Husum’s light weight fully bleached linerboards complete Metsä Board’s offering enabling growth in totally new end uses

‒ Steady decrease of unprofitable paper volumes in Husum

‒ 70 % growth in North America during the past 5 years‒ USA today the biggest single market‒ All leading corrugated box manufacturers as main customers

18

Metsä Board’s fresh forest fibre linerboard deliveries in 2014

EMEA 63%

Americas 36%

Asia-Pacific 1%

Metsä Board’s fresh forest fibre linerboard deliveries to North America, 1,000 tonnes

0

30

60

90

120

150

2009 2010 2011 2012 2013

+70%


Threshold for New Producers to Enter High Quality Paperboard Segment Is High

‒ Limited availability of high quality fibre ‒ Sustainably harvested high quality fresh forest fibres are a must ‒ Own state of art chemical, mechanical and BCTMP pulping capacity vital competitive factors

‒ Leading global consumer goods companies 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 uniform brand look and feel globally‒ Sustainability and product safety aspects

‒ Skilled people and organizations a crucial success factor‒ High-quality paperboard companies have traditions from several generations

19


New Innovative Light-Weight Paperboards Introduced in 1Q 2014 to Broaden Offering and Accelerate Growth

20

Carta Dedica Light weight cup stock and food service board

Carta Allura Luxury packaging board

Modo Northern Light CoatedHigh quality liner for corrugated and microflute packaging


Final Steps of Transformation


Metsä Board Grows Its Paperboard Business, Plans to Fully Exit Paper Production and Considers a Rights Issue

‒ Major growth step in the folding boxboard business thanks to EUR 170 million investment in a new production line and related infra at Husum mill in Sweden

‒ Planned discontinuation of Husum mill’s paper production mostly by the end of 2015 and fully by the end of 2017

‒ New measures to eliminate losses of Gohrsmühle mill in Germany

‒ Renewed management and reporting structure

‒ Measures expected to be financed by current liquidity, operating cash flow and potentially also by a rights issue

22


New Measures Finalize Metsä Board’s Successful Transformation

23

ROCE %

Marketgrowth

‒ 2006: New strategy‒ 2007-2013: Numerous

divestments, closures and restructuring measures

‒ 2015: Completion of the transformation

The leading fresh forest fibre paperboard

company in EuropeEuropean

paper

Fresh Forest Fibre Paperboard


Investment in Husum the Most Cost-Competitive Alternative to Increase Capacity

‒ Metsä Board’s biggest mill integrate

‒ Skilled personnel

‒ Large two line pulp mill

‒ State of art coating technology

‒ Efficient power plant

‒ Own harbour

‒ Good existing other infrastructure

‒ Proximity to large forest areas


Husum Mill Will HaveTwo Production Lines and It Becomes aLeading Fresh Forest Fibre Paperboard Unit in Europe

25

‒ New folding boxboard machine, BM1‒ EUR 170 million investment ‒ Production capacity approximately 400,000 t/a ‒ Start up in early 2016‒ Full production capacity reached by end 2016

‒ Current PM8 to be converted to a linerboard machine, BM2‒ Only minor investment needed‒ Production capacity approximately 300,000 t/a ‒ Start up in spring 2015‒ Husum’s linerboard sales run rate over 100,000 t/a at the moment

‒ Current state of art off-line coating machine serving both paperboard machines

‒ All in all, Husum’s fresh forest fibre paperboard capacity will be approximately 700,000 t/a


Husum’s New Paperboard Volumes to Be Sold Mainly Outside Europe

26

‒ Husum’s new folding boxboard volumes planned to be sold mainly to North America and to the food service segment globally

‒ New linerboard volumes expected to be sold both in Europe and North America, increasingly also to new applications e.g. in food packaging

‒ If the demand supply situation so requires in the coming years, Metsä Board has possibilities to adjust its production accordingly


Metsä Board is Growing Especially in North America Where Paperboard Volumes Have Grown Over 40% in 2014

27

Fresh forest fibre linerboard deliveries to North America, 1,000 tonnes

0

30

60

90

120

150

2009

2010

2011

2012

2013

2014

E

FBB deliveries to North America, 1,000 tonnes

+100%

0

5

10

15

20

25

30

2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

+270% ‒ Metsä Board’s FBB, that is even over 30% lighter than other paperboards, has proven its strong competitiveness

‒ FBB volume target in North America is over 300 000 t/a in mid-term

‒ Kemi’s coated fresh forest fibre linerboards are clear market leaders and quality benchmarks in North America

‒ Growth further accelerated by Husum’s light weight liners

‒ Linerboard volume target in North America is over 250 000 t/a in mid-term


Very Good Growth Potential in the New Food Service Segment

‒ Market growth 4 %/a ‒ Global market about 2,5 million tonnes

‒ The leading responsible brands are favoring more and more paperboard in food service solutions

‒ Metsä Board’s FBB lighter in weight than typical paperboards in food service end use

‒ Volume in 2014 over 20 000 tonnes. Mid-term target over 150 000 t/a

28


Husum’s Entire Paper Production Is Planned to Be Discontinued

29

‒ Mostly at the end of 2015 and full exit by the end of 2017

‒ Paper production at two machines planned to be ceased by end 2015‒ Combined paper capacity roughly 600,000 t/a‒ Related statutory negotiations to commence in December 2014

‒ Uncoated fine paper business reel production will be continued at the BM2 until the linerboard sales volumes reach the full capacity


Metsä Board’s Pulp Self-Sufficiency Remains Strong

‒ Husum’s combined softwood and hardwood pulp capacity is approximately 750,000 t/a. After the planned measures market pulp volumes are expected to be roughly 350,000 t/a

‒ In addition to chemical pulp produced at the site, the new folding boxboard production at Husum will use majority of the BCTMP produced at Kaskinen mill in Finland

‒ Metsä Board’s associated company Metsä Fibre plans a bioproduct mill in Äänekoski, Finland with an investment cost of approximately EUR 1.1 billion with net capacity increase of approximately 800,000 t/a

‒ Final investment decision planned for spring 2015. Operations would then commence during 2017‒ Capital invested by Metsä Board would be maximum EUR 30 million (pro rata)

‒ All in all, Metsä Board’s pulp balance is expected to be approximately +500,000 t/a from 2018 onwards‒ All market pulp is softwood chemical pulp‒ Reserve to grow paperboard business further in the future while maintaining self-sufficiency in pulp

30


Gohrsmühle Mill’s Heavy Losses Targeted to Be Eliminated

‒ Main products cast coated and label papers

‒ Approximately 480 employees

‒ Estimated annual sales about EUR 85 million and annualized operating loss EUR 20 million based on 1-3Q 2014 performance

‒ Main target is to divest the mill during the first half of 2015

‒ If the divestment will not materialize in the set time frame, other measures to eliminate the heavy losses will be introduced

31


Significant Financial Improvements Thanks to the New Measures

‒ Based on growth of paperboard business and discontinuation of Husum’s paper production, Metsä Board’s annual sales is expected to remain rather stable

‒ Operating result excluding non-recurring items expected to improve by approximately EUR 50 million compared to 1-3Q 2014 annualized performance

‒ Mostly in 2017 and fully in 2018‒ Investment shutdown in Husum is forecast to impact operating result in 2015

negatively roughly by EUR 20 million

‒ Additionally, elimination of Gohrsmühle mill’s losses would improve MetsäBoard’s annual operating result by approximately EUR 20 million. Reduction in annual sales would be approximately EUR 85 million

32


Financing of the Planned Measures

‒ Partly financed through a rights issue of approximately EUR 100 million, based on the Board of Directors’ authority granted by the AGM

‒ Possible implementation in 1Q 2015‒ Metsäliitto Cooperative is committed to a pro rata investment

of approximately EUR 43 million

‒ Other financing sources are current liquidity sources and operating cash flow

‒ Metsä Board’s balance sheet continues to be strong also after the new measures

‒ Investments‒ Planned discontinuation of Husum’s paper production‒ Potential negative cash impact due to the elimination of

Gohrsmühle mill’s losses

33


Management Structure Renewed to Enable Successful Implementation of the New Growth and Restructuring Measures

‒ Management structure changed from business area to a function based model

‒ Reporting segments are from 1Q 2015 onwards the following: ‒ Paperboard‒ Non-core operations

‒ Paperboard segment includes folding boxboard, fresh forest fibre linerboard, wallpaper base and market pulp businesses

‒ Non-core operations include Husum and Gohrsmühle mills’ paper businesses

‒ Reporting under Other operations as well as accounting for the 24.9 per cent ownership in Metsä Fibre Oy will remain unchanged. The associated company result of Metsä Fibre will be allocated to Paperboard

‒ Financial statements 2014 will be based on the old reporting segments ‒ The restated historical figures will be released during February 2015

34


Metsä Board Strengthens Its Market Leadership

35

Note: Share of production capacity post-measures shown in percentages; Share of production capacity currently shown in parenthesisSources: Metsä Board, Pöyry Management Consulting Oy

Largest White Top Fresh Forest Fibre Linerboard Producers in Europe

Largest Folding Boxboard Producers in Europe

400

0 800400 1,000 1,200 1,400200 600

Holmen 7%(8%)

Current Post-measures

935(34%)

Stora Enso

11%(13%)

Capacity: 1000 tons/a

1335 / 42%

+43%

Mayr-Melnhof

7%(8%)IP

21%(25%)

200

0 700600500400300200100


695 / 34%

+41%


SCA

Smurfit Kappa 25%(28%)

Mondi 13%(14%)

BillerudKorsnäs

10%(11%)

15%(17%)

495(27%)


Business Structure Improving Materially. Great Platform to DevelopBusiness Further and Create Value for Customers and Owners

36

Sales distribution 3Q 2014

Paperboard 61%

Paper 24%

Market pulp 15%

Target sales distribution as of 1Q 2018*

Paperboard 80%

Market pulp 20%

*Indicative. Assumes that Metsä Fibre Äänekoski bioproduct plant is built.


3Q 2014 Results and Outlook


Highlights in 3Q 2014

38

‒ Profitability improved from previous quarter

‒ Paperboard delivery volume continued to increase and price levels were stable

‒ Paper deliveries and average prices were at previous quarter level

‒ Market pulp deliveries reduced but average price increased slightly

‒ Good production including planned maintenance shutdown in Kemi

‒ Net debt reduced clearly to EUR 491 million due to strong cash flow

‒ Mika Joukio started as the new CEO on 1 October 2014

‒ Metsä Board was awarded by a position in the CDP’s Climate Disclosure Leadership Index in October


3019

29 28

6

2520

24 2636 35

0

10

20

30

40

50

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

545 522 532 509 535 503 514479502 501 494

0

200

400

600

800

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

-9

1710 9

1927

918

42021

-10

0

10

20

30

40

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Sales Operating result excl. non-rec. items

Result before taxes excl. non-rec. items

Operating Result in 3Q 2014 Improved as Expected

39

EPS excl, nris has more than doubled to EUR 0.17 in 2014

EUR million EUR million

EUR million


Paperboard incl. Market Pulp Accounted over 75 per centof Sales in 3Q 2014

40

Sales distribution 3Q 2014

Paperboard 61%

Paper 24%

Market pulp 15%

Sales distribution 2006

Paper 56%

Paperboard 18%Paper merchanting 26%


‒ Folding boxboard delivery volumes increased from 2Q 2014

‒ Good progress in North America and in the food service segment

‒ Result was weakened mainly by decreased speciality paper deliveries

‒ Folding boxboard price level was stable and no material changes are expected in the coming months

‒ Folding boxboard deliveries are in 4Q expected to decrease due to seasonality

41

EBIT, excl. non-recurring items

Sales

EUR million

EUR million

1820 1820

1215

10

0

6

12

18

24

30

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

230219214208220218222

0

50

100

150

200

250

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Cartonboard Business Area’s Profitability Roughly at Previous Quarter Level in 3Q 2014


Linerboard and Paper’s Result Improved Clearly in 3Q 2014

‒ Fresh forest fibre linerboard deliveries increased from 2Q 2014 and prices were stable

‒ Paper delivery volume and average price level were unchanged

‒ Market pulp delivery volumes decreased but average price improved slightly

‒ Annual contract compensations had a positive result impact

‒ Fresh forest fibre linerboard deliveries in 4Q are expected weaken seasonally. No major price changes in sight

‒ Paper deliveries in 4Q are forecast to be at previous quarter level. WFU prices are expected to decrease slightly and coated paper prices remain stable

‒ Market pulp volumes and average prices are forecast to be stable in 4Q

42

EBIT, excl non-recurring items

EUR million

EUR million

Sales

20

15

24

1516

7

20

0

5

10

15

20

25

30

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

271262

271288 269 267250

0

50

100

150

200

250

300

350

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14


Short-Term Profitability Outlook

43

‒ Metsä Board’s operating result, excluding non-

recurring items, is in the fourth quarter of 2014

expected to be roughly the same as in the third

quarter of 2014


‒ Annual EBIT sensitivity of 10 % change vs. euro‒ EUR 45 million in USD

‒ EUR 20 million in GBP

‒ Reversed EUR 30 million SEK

‒ Hedging of the main foreign currency flows is 5-7 months. Thus,

the recent exchange rate changes are visible in 2015

‒ Business area numbers reflect exchange rate changes rapidly but

hedge accounting result in Other operations balance the impact

Recent Changes in Exchange Rates Are Favoring Metsä Board


Strong Growth in Paperboard Businesses Continues

Metsä Board’s paperboard deliveries increased in 1-3Q 2014 by 10 % from last year

45

169 176 185 185 189 192 197 185 191 197210

8085

93 8594 93

9591

109 108

118

0

50

100

150

200

250

300

350

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

Fresh forest fibre linerboardFolding boxboard

Paperboard deliveries1 000 tonnes


Target is to Cover the Normal 1-2 %/a Cost Inflation by Own Continuous Improvement Measures

46

Cost item Share of total costs

Cost change in 2014 vs. 2013

Wood 22 % -2 %

Logistics 14 % +2 %

Chemicals, pigments and fillers 15 % 0 %

Energy 14 % -4 %

Fixed costs 32 % +1 %

Fixed and variable costs total -1 %

No cost inflation expected in 2014


EUR / tonne

Folding Boxboard Market Price in Europe2004 – 3Q 2014

47

Source: Pöyry Management Consulting

800

900

1000

1100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


500

600

700

800

900

2009 2010 2011 2012 2013 2014

White-Top Kraftliner Market Price in Europe2009 – 3Q 2014

Source: Foex


EUR / tonne

Paper and Pulp Market Price in Europe1998 – 3Q 2014

Coated fine paper (100 g)Uncoated fine paper (B-copy, 80 g)

Softwood pulp NBSKCoated magazine paper LWC (60g)

Source: Foex, Reuters

EUR/USD

EUR/USD

400

500

600

700

800

900

1000

1100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140,8

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7

49


Investments


170

406766

95

7372

128

259

428

0

100

200

300

400

500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ion

€

Capital Investments about 170 m€ in 2015

Indicative levels for 2014 and 2015

51


Funding and Debt Information

52


Significant Divestments– EUR 3.7 billion in assets divested since 2001

2004 Metsä Tissue 5702002 Papierfabrik Albbruck 2352001 MD Papier 3002001 Noviant (19%) 41

3,671

Year Divestiture Enterprise Value

m€

2005 Savon Sellu 202005 Forestia (95%) 163

2005 Botnia (8%) 1642007 Botnia (9%) 2402007 Folding carton plants 602007 Map Merchant Group 3822008 New Thames mill 82**2008 100 000 B2 shares in PVO 802008 Graphic Papers 750

* Cash portion**Incl. pension liabilities

2009 Metsä-Botnia’s Uruguayn operations 300*2011 Hallein 34

53

2012 0.5 % stake in PVO 642012 7.3 % stake in Metsä Fibre 1382013 Alizay property and other assets 222014 Lielahti real estate 26


Cash Flow Continued Strong and Net Debt Reducedto EUR 491 Million

‒ Cash flow from operations was EUR 52 million in 3Q

‒ Gross debt EUR 701 million and net debt EUR 491 million

‒ Net gearing 57 %, equity ratio 40 % and average interest rate 4,2 % at the end of 3Q 2014

‒ Solid liquidity position of over EUR 400 million

‒ S&P raised the outlook of their B+ rating to positive. Moody’s raisedtheir rating to B1 in December

54

Net Debt / EBITDA

Net Debt

491

827

0

250

500

750

1000

2010 2011 2012 2013 3Q14

2,12,7

0

1

2

3

4

5

2010 2011 2012 2013 3Q14

EUR million


Loans and Interest Rate

At the end of 3Q 2014

‒ Average maturity of long term loans 3,6 years

‒ Average interest rate of loans (including derivatives) 4,2 %

‒ Interest rate maturity of loans (including derivatives) 30 months

‒ Of the loans about 24 per cent was subject to variable interest rates and 76 per cent to

fixed interest rates

55


Diversified Funding Sources

56

Long-Term Interest Bearing Liabilities 30.9. 2014

31 %

8 %4 %

29 %

28 %

BondsPension premium loansLoans from financial institutionsFinance leasesOther interest bearing liabilities

Total EUR 701 million


Interest Bearing Net Liabilities 30.9.2014

‒ Long-term 694

‒ Short-term 7

Total interest bearing liabilities 701

‒ Liquidity and interest bearing receivables 210

Interest bearing net liabilities 491

57

EUR million


Well Balanced Maturity Schedule

13

100

34

83

181

254

244

100

14

0

50

100

150

200

250

300

2014 2015 2016 2017 2018 2019 2020 >2 020

Long-term interest bearing liabilitiesCommitted undrawn credit facilities

EUR million

58

Long-term Interest Bearing Liabilities and Committed Undrawn Credit Facilities 30.9.2014


Balance Sheet Ratios

59

777

827783

625597

491

17,7

2,7

4,43,4

2,92,1

0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013 3Q 140

2

4

6

8

10

12

14

16

18

20

Net Debt and Net Debt/EBITDA* Net Gearing, %

57

84 83

106

7270

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 3Q14

Net debt, EUR million

Net debt/EBITDA

*Excluding non-recurring items


39,8

33,3 32,4

38,7 40,7 41,0 39,8

0

5

10

15

20

25

30

35

40

45

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

5765

69707574

69

0

10

20

30

40

50

60

70

80

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Quarterly Balance Sheet Ratios

Equity Ratio Net gearing%%

60


Debt Programs 30.9.2014

61

The following table sets forth the significant debt securities issued and outstanding of Metsä Board as at Sept. 30, 2014

Average

Long-term borrowings Total amount Outstanding Interest Rate *) Maturity

EUR 225 million Bond Issue 2014 EUR 225 EUR 225 4,5 % 2019Syndicated credit facility 2014 EUR 250 EUR 150 5,1 % 2018EUR 105 million bilateral loans EUR 105 EUR 105 3,6 % 2014-2017EUR 24 million finance leases EUR 24 EUR 24 2,3 % 2014-2020EUR 210 million pension loans EUR 210 EUR 195 3,8 % 2014–2020

*) The average interest rate take into account outstanding interest rate swaps and amortised arrangement fees.Average interest rate of all Metsä Board interest bearing liabilities including interest rate derivatives per 30.9.2014 is 4,2 %.

The following table sets forth Metsä Board´s principal long-term liquidity reserves as at September 30, 2014:

Average Liquidity reserves Total amount Outstanding Interest Rate *) Maturity

(EUR in millions)Revolving Credit Facility 2014 EUR 100 EUR 0 – 2018Pension loan facilities EUR 210 EUR 195 3,8 % -

Short-term funding programmes Metsä Group internal short-term limit EUR 150 EUR 0 – 0-12 monthsMetsä Group Treasury funding programmes:EUR 150 million domestic CP-program EUR 150 EUR 0 – 0-12 months

(currency in millions)


Ratings’ History

2000S&P: Short term ratings lowered to A3, Long term ratings placed to credit watch negativeMoody’s: Long and short term ratings outlook changed from stable to negative

2001S&P: Long term ratings lowered to BBB-,stable outlookMoody’s: Long and short term ratings lowered to Baa3/P3, negative outlook

2003S&P: Downgrade to BB+, stable outlookMoody’s: Downgrade to Ba1, negative outlook

2004S&P: Outlook changed from stable to negative, ratings affirmedMoody’s: Downgrade to Ba2, stable outlook

2005S&P: Downgrade to BB, stable outlookMoody’s: Outlook changed from stable to negative, ratings affirmed

2006S&P: Downgrade to BB-, negative outlookMoody’s: Downgrade to Ba3, negative outlookMoody’s: Downgrade to B2, negative outlookS&P: Downgrade to B+, negative outlook

2007Moody’s: Downgrade to B3, negative outlookS&P: Downgrade to B, negative outlookS&P: Downgrade to B-, stable outlook

2008S&P: Outlook to negative

2009S&P: Downgrade to CCC+, negative outlook Moody’s: Downgrade to Caa1, outlook negative

2010S&P: Outlook to stableMoody’s: Outlook to stableS&P: Upgrade to B-, stable outlookMoody’s: Upgrade to B3, outlook to positive

2011S&P: Outlook to positiveS&P: Outlook to stableMoody’s: Outlook to stable

2012Moody’s: Outlook to positive

2013S&P: Outlook to positiveMoody’s: Upgrade to B2, outlook stableS&P: Upgrade to B, outlook stableMoody’s: Outlook to positive

2014S&P: Outlook to positiveMoody’s: Upgrade to B1

62


General Info


Metsä Board in Brief

‒ Annual sales about EUR 2.0 billion

‒ The leading European fresh forest fibre paperboard company

‒ Also a market pulp supplier

‒ Valuable holdings in Metsä Fibre and Pohjolan Voima

‒ Main customers are brand owners, printers, corrugated packagingmanufacturers, merchants and office products suppliers

‒ Global sales and customer service network in 70 countries and nine production units in Finland, Sweden and Germany

‒ Listed on the NASDAQ OMX Helsinki Ltd and a part of Metsä Group, one of the largest forest industry groups in Europe

65


66

Linerboards from Kemi

Folding Boxboard

Linerboards from Husum

Metsä Board Is Able to Offer a Wide Coverage of High-Quality Paperboards for Consumer Goods Companies and Converters


Metsä Board’s Main Customers

Brand owners

Printers and converters

Advertising and design agenciesOffice paper resellers

Merchants

67


Metsä Board’s Renewed Fresh Forest Fibre Based PaperboardPortfolio Fits Well to Consumer Goods Companies’ Demand

68

Consumer Goods Companies

Fresh forest fibre linerboard

Graphicalend-uses

Carton printersMerchants Corrugated box manufacturers

Folding boxboard


17 %

32 %

12 %

9 %

12 %

6 %

9 %3 %

Paper PulpPaperboard PackagingTissue Mechanical Forest ProductsMerchanting Chemicals

59 %

25 %

16 %

Focus on Core Businesses

1995 Sales€2.3 billion

2013 Sales€2.0 billion

8 Businesses 3 Businesses

69


Acquisitions

Divestments

Biberist Paper Mill

Simpele Mill UK Paper

Modo Paper

Zanders

ChemicalsBusiness

Botnia Wood

CorrugatedPackaging

MD Papier Metsä Tissue

Albbruck

Metsä Board Restructuring Story

SavonSellu

Forestia

Kemiart Liners (53 %)

8% in Botnia

PSM

9% in Botnia

Cartonplants

Map

100 000 B2 shares

in PVO

New Thames MB

Uruguay

Graphic Papers

Part of Reflex

Halleinmill

1997 20001998 1999 2001 2002 2003 2004 2005 2006 2007 20092008 2010 2011

70

Rest of Reflex

0.5% in PVO

2012

7.3 % in Metsä Fibre

2013 2014

Alizay mill Lielahti

real estate


Annual Sales Development

2019210824852605

2432

3236

4440

56245241

54606044

65646923

5898

33193014

2313

4044

0

1000

2000

3000

4000

5000

6000

7000

8000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EUR, million

71


EBITDA Development

72

EBITDA excl. non-recurring items

176

208

186179

305

44

0

60

120

180

240

300

2009 2010 2011 2012 2013 1-3Q 2014

EUR million


Metsä Board Corporate Management Team as of 1 January 2015

CEOMika Joukio

Marketing and Sales

Seppo Puotinen

Business Development

Sari Pajari

Production and TechnologyAri Kiviranta

Finance g

Markus Holm

Human Resources

Susanna Tainio


Operations


0

500

1 000

1 500

2 000

2 500

Paper Board Pulp and BCTMP

1000 tons/a

Production Capacity

75

Currently After Implementation of planned measures

0

500

1 000

1 500

2 000

2 500

Wallpaper base Board Pulp and BCTMP

1000 tons/a


Production Locations

Husum

Gohrsmühle

ÄänekoskiSimpele

Joutseno

Kemi

TakoKyro

Kaskinen

76

Paperboard mills‒ Husum‒ Kemi‒ Kyro‒ Tako‒ Simpele‒ Äänekoski

Pulp mills‒ Husum‒ Joutseno‒ Kaskinen

Speciality paper mills‒ Kyro‒ Gohrsmühle


Paperboard and Paper Capacity by Grade Currently

(1000 t/a)

77

PAPERBOARD AND PAPER MILLS

Country Machines Folding Kraftliner Uncoated Speciality Coated TotalBoxboard Fine Paper Paper Paper

Tampere (Tako) Finland 2 205 205Kyröskoski (Kyro) Finland 2 190 105 295Äänekoski Finland 1 240 240Simpele Finland 1 300 300Kemi Finland 1 375 375Husum Sweden 3 120 420 260 800Bergisch Gladbach (Gohrsmühle) Germany 2 50 50

Total 12 935 495 420 155 260 2265


Pulp Capacity Currently

(1000 t/a)

78

PULP MILLS

Country Chemical BCTMPPulp Total

Husum Sweden 750 750Joutseno Finland 290 290Kaskinen Finland 300 300

Total 750 590 1340

METSÄ FIBRE *

Country ChemicalPulp Total

Äänekoski Finland 500 500Kemi Finland 590 590Rauma Finland 650 650Joutseno Finland 690 690

Total 2430 2430

* Metsä Board's share is 24.9% of the capacity


Personnel Development

31163279407045384903

6546

9508

1412515154

16490

2107022237

17351

20372

0

5000

10000

15000

20000

25000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

79


Deliveries


Metsä Board’s Products Are Sold Globally. Europe Is the Domestic Market. Importance of North America Is Growing

81

Fresh Forest Fibre LinerboardFolding Boxboard

26 %

13 %

13 %

48 %

Western EuropeEastern EuropeAmericasAsia and Pacific

6 %

57 %

1 %

36 %

9 %

85 %

6 %

Uncoated Fine Paper


Sourcing


Personnel 15 %

Other fixed17 %

Delivery costs14 %

Wood22 %

Chemicals, pigments and

fillers15 %

Other variables

3 %Energy

14 %

Cost Structure 2013* (total annual costs in industrial operations ~ EUR 1.6 Billion)

Fixed costs

Variable costs

* Percentage of annual costs in industrial operations

83


Electricity Sourcing 2013 (total 2,767 GWh)

Through PVO shareholding

29 %

Outsourced generation

2 %

Own generation20 %

Purchased energy49 %

84


Fuels Used 2013 (total 13.1 TWh)

Wood-based58 %

Nuclear power22 %

Natural gas6 %

Oil2 % Peat

2 %Coal5 %

Hydro5 %

85


Wood Sourcing by Country in 2013

1 000 m3

Sweden 1 789

Finland 1 191

Baltic countries 1 074

Russia 764

Total 4 818

86


Development of Softwood PulpwoodCost at Mill, Wood for Chemical Pulping

1980 – 1Q 2014

Source: Pöyry Management Consulting Oy

87

EUR/m³sob


Development of Softwood PulpwoodCost at Mill, Wood for Mechanical Pulping

1980 – 1Q 2014


88

EUR/m³sob


Development of Hardwood PulpwoodCost at Mill, Wood for Chemical Pulping

1980 – 1Q 2014

Source: PöyrySource: Pöyry Management Consulting Oy

89

EUR/m³sob


Sustainability


WE OFFER SUSTAINABLE CHOICESProduct and services• Sustainable products, services and

innovations• Product safety

THE SMALLER THE ENVIRONMENTAL IMPACT THE BETTEREnvironmental efficiency• Energy & climate• Water• Material efficiency• Environmental risk management

WE BRING FOREST TO YOUSupply chain and raw materials• Sustainable forest management &

nature values• Sustainable supply chain• Partnership with suppliers and

forest owners

WE CREATE WELL-BEINGInternal and external stakeholders• Human rights• Ethical business practices• Responsible employer• Well-being for local communities

Sustainability Is at The Heart of Our Operations

91


SUSTAINABILITYTARGETS

SUPPLY CHAIN

ETHICAL BUSINESS PRACTICES

WELL-BEING

ENERGY AND CLIMATE

CO2-30%

100%COVERAGE OF

CODE OF CONDUCT TRAINING

100%COVERAGE OF

SUPPLIER CODE OF CONDUCT

LOST-TIMEACCIDENTS0

SHARE OF CERTIFIED WOOD

ABOVE80%

WOOD

SICKNESSABSENTEEISM

BELOW3%

ENERGYEFFICIENCY +10%


- The amount of certified wood was 65%

- The EU Timber Regulation came into force in 2013. Metsä Board paperboards are in compliance with the regulation

- A new supply chain management target waslaunched: to audit 100% of risk rated key material suppliers against sustainability criteria by end 2015

92 % of all Metsä Board purchases, excluding wood, come from countries where we have own production

Raw Materials and Supply Chain Management in 2013

93

Metsä Board’s purchases by country % Exluding wood supply


- Share of wood based biofuels increased to 63% of total fuels

- Energy efficiency has been improved by 7% from 2009

- Process water use per product tonne has decreased by 15% from 2010- 97% of the water we use is surface water

- Total reduction of fossile CO2 emissions has been 35 % since 2009

Resource and Environmental Efficiency in 2013

94

Metsä Board Greenhouse gas effect (CO2 equivalent, 1,000 tonnes)


- In 2013, Metsä Board’s lost-time accident frequency rate was 12.2 (13.2 in 2012) and sickness absenteeism rate 3.9 (3.9)

- Metsä Board aims to improve its lost-time accident frequency rate by 10 per cent each year. The long-term target is zero

- The target is to keep the sickness absenteeism rate at the best European level and below 3 per cent at all times

Well-Being and Accident Rate Development in 2013

95

Sickness Absenteeism Development


Owners

96


Ownership Structure 30.9.2014Shares Votes

Source: Euroland97


Market Position


Metsä Board Strengthens Its Market Leadership

99

Note: Share of production capacity post-measures shown in percentages; Share of production capacity currently shown in parenthesisSources: Metsä Board, Pöyry Management Consulting Oy

Largest White Top Fresh Forest Fibre Linerboard Producers in Europe

Largest Folding Boxboard Producers in Europe

400

0 800400 1,000 1,200 1,400200 600

Holmen 7%(8%)


935(34%)

Stora Enso

11%(13%)


1335 / 42%

+43%

Mayr-Melnhof

7%(8%)IP

21%(25%)

200

0 700600500400300200100


695 / 34%

+41%


SCA

Smurfit Kappa 25%(28%)

Mondi 13%(14%)

BillerudKorsnäs

10%(11%)

15%(17%)

495(27%)


0 100 200 300 400 500 600 700 800 900 1000

Others

Holmen

Cascades

IP

Mayr-Melnhof

Stora Enso

Metsä Board

Folding Boxboard Capacities in Europe 2014 BIG-5 = 88% of total

Capacity: tons/year (thousand)

34%

25%

13%

8%

8%

7%

5%


100


0 100 200 300 400 500 600

Others

SCA

Mondi

BillerudKorsnäs

Metsä Board

Smurfit Kappa

White Top Kraftliner and Fully Bleached Kraftliner Capacities 2014 in Europe BIG-5 = 97% of total


28%

27%

17%

14%

11%

Source: Metsä Board, Pöyry Management Consulting Oy

101

3%


0 500 1000 1500 2000 2500 3000 3500

Others

Double A

Arctic Paper

Metsä Board

UPM

International Paper

Stora Enso

Mondi

Portucel

Uncoated Fine Paper Capacities in Europe 2014BIG-5 = 58% of total

14%

12%

12%

10%

8%

4%

3%

3%

29%



102


103

Make the most of Metsä Board

Thank You!www.metsaboard.com

Juha LaineHead of IR

+358 10 [email protected]

investor presentation 3q 2014 - metsä board · investor presentation 3q 2014 10.12. 2014. metsä...

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