metsa group's interim report january-september 2017

Metsä Group Interim report Q3/2017

Kari JordanPresident and CEO

1 November 2017

• Sales EUR 3,712 million (1–9/2016: EUR 3,483 million)• Operating result* EUR 381 million (EUR 332 million)• Operating result of sales* 10.3% (9.5%)• Return on capital employed* 11.2% (10.5%)• Sales grew mainly as a result of greater delivery volumes • Result improved particularly due to paperboard delivery

volumes and rises in pulp prices

1 November 20172

Metsä Group’s good financial performance continued

Metsä Group – Q3

*comparable

• Bioproduct mill in Äänekoski, Finland, started up • Metsä Wood’s new Kerto® LVL line in Lohja, Finland, started up• The foundation stone of Metsä Wood’s new birch plywood mill was

laid in Pärnu, Estonia• Metsä Wood announced its plan to build a new Kerto® LVL line at

its Punkaharju mill in Finland• Metsä Board issued an unsecured bond of EUR 250 million• Moody’s upgraded Metsä Board’s credit rating to Ba1 • Vesa-Pekka Takala was appointed Deputy Managing Director of

Metsäliitto Cooperative

1 November 20173

Metsä Group – Q3

Events in the third quarter of 2017

1 November 20174

1,254 1,2651,204

1,248 1,2551,330

1,225 1,2051,156 1,184 1,143 1,175 1,216 1,235 1,260

0

200

400

600

800

1 000

1 200

1 400

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 Q4/17

Sales

Metsä Group – Q3

EUR million

1 November 20175

Operating result

Metsä Group – Q3

10592

104117

129137

149

123109

120

103 107

128119

134

70

160

103

84

118

154142

128

107

119

107110

131122

143

0

20

40

60

80

100

120

140

160

180

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 Q4/17

Comparable operating result Operating result (IFRS)

EUR million

1 November 20176

5364 68 71

8994

73

87

105

92104

117129

137149

123

109120

103 107

128119

134

0

20

40

60

80

100

120

140

160

Q1/

12 Q2

Q3

Q4

Q1/

13 Q2

Q3

Q4

Q1/

14

Q2

Q3

Q4

Q1/

15

Q

2

Q

3

Q

4

Q1/

16

Q

2

Q

3

Q

4

Q1/

17

Q2

Q

3

Q

4

Comparable operating result

Metsä Group – Q3

EUR million

Change in comparable operating result

1 November 20177

Metsä Group – Q3

EUR million

Comparable operating result 1–9/2016 332

Sales prices -4

Sales volumes 67

Exchange rates 20

Raw materials and energy 3

Employee costs 5

Change of inventories -29

Other -13 49

Comparable operating result 1–9/2017 381

Items affecting comparability 1–9/2017

1 November 20178

Metsä Group – Q3

EUR million 1–9/2017

Operating result (IFRS) 396.7

Items affecting comparability:

Metsä Board / subsidiaries dissolved in England 10.2

Metsä Board / sale of Kyro’s paper machine, net 3.4

Metsä Wood / divestment of the project business 3.3

Metsä Wood / a dissolved subsidiary in England -1.3

Other -0.2

Items total +15.4

Comparable operating result 381.2

1 November 20179

Comparable ROCE

Metsä Group – Q3

9.0

11.1

14.2

10.511.2

0

2

4

6

8

10

12

14

16

QI–III/2013 QI–III/2014 QI–III/2015 QI–III/2016 QI–III/2017

%

Target >10%

1 November 201710

Metsä Group – Q3

Equity ratio

37.9 37.9

43.2 43.9 43.4

0

5

10

15

20

25

30

35

40

45

50

12/2013 12/2014 12/2015 12/2016 9/2017

%

1 November 201711

Interest-bearing net liabilities

Metsä Group – Q3

1,510

938

610

1,0331,165

0

250

500

750

1 000

1 250

1 500

1 750

12/2013 12/2014 12/2015 12/2016 9/2017

EUR million

1 November 201712

Capital expenditure

Metsä Group – Q3

214143

492

758

530

0

100

200

300

400

500

600

700

800

1–12/2013 1–12/2014 1–12/2015 1–12/2016 1–9/2017

EUR million

Full year estimate

Income statement

1 November 201713

Metsä Group – Q3

EUR million QI–III/2017 QI–III/2016 ChangeSales 3,711.8 3,482.7 229.0

Other operating income 43.4 52.3 -8.9

Operating expenses -3,179.2 -3,011.6 -167.6

Depreciation and impairment losses -179.3 -190.8 11.5

Operating result 396.7 332.7 64.0

Comparable operating result 381.2 332.1 49.1

Share of results from associated companies and joint ventures 15.9 -1.4 17.3

Exchange gains and losses -3.3 0.8 -4.1

Other net financial items -64.1 -56.5 -7.5

Result before tax 345.2 275.5 69.7

Key figures

1 November 201714

Metsä Group – Q3

QI–III/2017 QI–III/2016 ChangeReturn on capital employed, % 11.6 10.6 1.0

Comparable return on capital employed, % 11.2 10.5 0.7

Return on equity, % 13.7 11.5 2.2

Comparable return on equity, % 13.0 11.5 1.5

Equity ratio, % 43.4 44.0 -0.6

Net gearing ratio, % 41 40 1

Interest-bearing net liabilities, EUR million 1,165 991 174

Capital expenditure, EUR million 530 540 -10

Personnel at end of period 9,223 9,451 -228

Cash Flow Statement I

1 November 201715

Metsä Group – Q3

EUR million QI–III/2017 QI–III/2016

Cash flow from operating activities

Result for the period 279.4 211.7

Adjustments to result for the period 278.0 267.8

Interest received 3.1 2.3

Interest paid -43.8 -33.1

Dividends received 1.6 1.0

Taxes -57.2 -98.2

Other financial items, net -15.7 6.3

Change in working capital 53.4 -181.3

Net cash flow from operating activities 498.8 176.4

Cash Flow Statement II

1 November 201716

Metsä Group – Q3

EUR million QI–III/2017 QI–III/2016Net cash flow from operating activities 498.8 176.4

Purchase of shares -2.5 0.0Acquired shares from non-controlling interests -27.7 0.0Investments -530.1 -540.2Sales of assets and others 29.3 49.2Change in members’ capital and other capital 40.9 48.9Interest on members’ capital and dividends paid -122.1 -120.2Change in long-term loans and committed facilities 212.9 64.9

Change in cash and cash equivalents 99.4 -321.0

Cash and cash equivalents at beginning of the period 895.1 1,120.8Translation differences and others -0.8 0.7Change in cash and cash equivalents 99.4 -321.0

Cash and cash equivalents at end of the period 993.8 800.5

1 November 201717

Personnel

Metsä Group – Q3

10,736 10,4109,599 9,300 9,223

0

2 000

4 000

6 000

8 000

10 000

12 000

12/2013 12/2014 12/2015 12/2016 9/2017

Wood Supply andForest Services

Wood Supply and Forest Services

1 November 201719

Metsä Forest –Wood Supply and Forest Services

EUR million QI–III/2017 QI–III/2016 Change

Sales 1,205.8 1,135.2 70.6



Depreciation and impairment losses -3.0 -2.5 -0.5

Operating result 18.9 22.0 -3.1

Items affecting comparability, total - - -

Comparable operating result 18.9 22.0 -3.1

% of sales 1.6 1.9 -0.3

Purchasing volumes of wood increased• In Finland, the supply of wood was steady,

and stumpage prices stable• Purchase volumes were at a clearly higher

level than last year• Rainy weather made harvesting conditions

challenging throughout the Baltic Sea area• Market situation in the Baltic Sea area grew

tighter with regards to almost all grades of wood• Metsä Forest delivered a total of approximately

23.7 million cubic metres (22.7) of wood • Metsä Forest began harvesting for the purposes

of the bioproduct mill’s production in August

1 November 201720

Comparable operating resultEUR million

Metsä Forest –Wood Supply and Forest Services

8.7

6.9 7.06.3

7.8

6.5

7.7

8.98.5

4.4

5.9

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Wood ProductsIndustry

Wood Products Industry

1 November 201722

Metsä Wood –Wood Products Industry

EUR million QI–III/2017 QI–III/2016 ChangeSales 351.6 366.3 -14.7


Operating expenses -320.0 -332.7 12.7


Operating result 28.5 30.0 -1.5

Items affecting comparability, total -1.8 0.4 -2.2

Comparable operating result 26.7 30.4 -3.7

% of sales 7.6 8.3 -0.7

Demand for wood products strong• Demand for Kerto® LVL products remained

strong• Decline in the sales is the result of the

divestment of the glulam and project business and the weakening exchange rate of the GBP

• Delivery volumes and sales of plywood grew especially thanks to strong demand in Northern and Central Europe

• New Kerto line in Lohja, Finland, started up• Foundation stone of the new birch plywood mill

was laid in Pärnu, Estonia• Metsä Wood announced its plan to construct a

new Kerto line at its Punkaharju mill in Finland

1 November 201723


Metsä Wood –Wood Products Industry

4.5

7.18.0

8.4 8.2

13.2

9.08.3

10.7

8.47.6

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Pulp and Sawn TimberIndustry

Pulp and Sawn Timber Industry

1 November 201725

Metsä Fibre – Pulp and Sawn Timber Industry






Items affecting comparability, total 0.1 -6.7 6.7


% of sales 14.6 13.2 1.4

1 November 201726


Price of pulp (PIX) 2009–Q3/2017

350

450

550

650

750

850

950

1050

350

450

550

650

750

850

950

1050

´09 ´10 ´11 ´12 ´13 ´14 ´15 ´16 ´17

Hardwood/EUR Softwood/EUR Hardwood/USD Softwood/USD

USD EUR

Source: Foex

Good financial performance continued in pulp industry

• Demand for pulp grew more than expected• Result improved particularly due to an in-

crease in sales prices• Market prices of long-fibre were 7% and short-

fibre pulp 10% higher than in Jan-Sept 2016• Bioproduct mill started up according to the

original schedule and budget in mid-August• Production and sales volumes of sawn timber

increased. The prices likewise increased, although they continue to be at a low levels

1 November 201727



82.0

95.6

83.479.7

61.2

53.246.4

53.7 54.5

70.8 68.4

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Paperboard Industry

Paperboard Industry

1 November 201729

Metsä Board – Paperboard Industry






Items affecting comparability, total -13.6 10.9 -24.5


% of sales 10.0 8.1 1.9

1 November 201730


600

700

800

900

1000

1100

1200

2011 2012 2013 2014 2015 2016 2017

Folding boxboard White-top kraftliner Sources: RISI, Inc. & FOEX Indexes Ltd

Prices of folding boxboard and white-top kraftliner inEurope 2011–Q3/2017EUR/ tonne

Result improved and paperboard sales increased

• Result improved mainly due to higher paperboard volumes, positive development in the market pulp business and the discontinuation of paper production

• Exchange rate fluctuations – including hedging – had a positive impact on the result

• Deliveries of folding boxboard and white fresh fibre linerboards increased by 17% and 16%, respectively

• Paperboard prices remained unchanged• Metsä Board issued an unsecured bond of

EUR 250 million• Moody’s upgraded Metsä Board’s credit

rating to Ba1

1 November 201731



43.247.0

54.6

35.1 35.0 35.834.0 32.8

45.2 43.5

50.4

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Tissue andCooking Papers

Tissue and Cooking Papers

1 November 201733

Metsä Tissue – Tissue and Cooking Papers

EUR million QI–III/2017 QI–III/2016 ChangeSales 753.1 741.6 11.4

Other operating income 2.7 2.5 0.2

Operating expenses -676.2 -670.0 -6.2



Items affecting comparability, total -0.1 -2.0 2.0


% of sales 6.7 5.7 1.0

Growth in sales due to increased delivery volumes• Growth in sales and result was primarily

due to increased delivery volumes• Result was impacted negatively by the

price increase in fresh and recycled fibre, as well as the British pound and the Swedish krona weakening

• Metsä Tissue invests in a new converting line for away-from-home products at the Raubach mill in Germany and a new converting line for consumer products at the Žilina mill in Slovakia

1 November 201734


Metsä Tissue – Tissue and Cooking Papers

15.8

7.6

13.2

18.6

13.5 13.2

15.8

20.6

17.616.3 16.8

0,0

5,0

10,0

15,0

20,0

25,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Summary

Outlook for the business areas 1/2Wood Supply and Forest Services• Wood demand will focus on felling sites to be harvested when the ground is unfrozen and, in terms of

energy wood, on crown wood• Poor harvesting and transportation conditions may impede wood deliveries, particularly in southern Finland

Wood Product Industry• The demand for wood products will remain good, which will be reflected in order book levels higher than

last year in both Kerto® LVL, and birch and spruce plywood• In terms of the UK, the outlook contains seasonal uncertainty due to which delivery volumes in the fourth

quarter are expected to decline

Pulp and Sawn Timber Industry• The pulp markets are expected to remain at the current good level, also in the fourth quarter • The demand for spruce sawn timber will remain good in all main market areas, and inventory levels are

expected to decline• The demand for and market balance of pine sawn timber are likewise expected to remain good

1 November 201736

Summary

Outlook for the business areas 2/2

Paperboard Industry • Growth in the demand for high-quality consumer packaging paperboard made from fresh fibre is

expected to continue in market areas important for Metsä Board• Delivery volumes in October–December are expected to decline slightly in comparison to the

previous quarter, due to the seasonal decline in December

Tissue and Cooking Papers• In the tissue and cooking paper markets, demand is expected to remain stable in all market areas• Demand for tissue paper will increase, particularly in Eastern Central Europe, and demand for

cooking papers in Asia

1 November 201737

Summary

• Metsä Group’s comparable operating result in the last quarter of 2017 is expected to be roughly at the same level as in the third quarter of 2017

1 November 201738

Near-term outlook

Summary

metsa group's interim report january-september 2017

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