Metsä BoardInterim report Q1/2016

• Stable market situation

• Paperboard deliveries were at all-time-high

level

• Operating result remained on the same level

as in Q4/2015

• Increase in working capital weakened

operative cash flow

• Balance sheet remained strong

• After the review period, Metsä Board

announced to iniatiate efficiency improvement

programme at Husum integrate

Q1 20162

Key points in Q1/2016

• Slight delay in the start-up

• Required quality targets have already been

reached

• First deliveries to US have arrived

• Target is to sell 200 000 tonnes of new folding

boxboard in 2016

• Total capacity, 400 000 tonnes, is expected to be

reached by end of this year

• Change from a paper mill to a paperboard mill is

completed

Q1 20163

New folding boxboard

machine in Husum

started in February

Q1 20164

Paper deliveries decreased as planned and

reduced sales

36 28 35 37 43 47 55 35 35

7%

6%7%

7%8%

9%

11%

8% 8%

0%

5%

10%

15%

0

10

20

30

40

50

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Operating result*EUR million and % of sales

21 20 27 32 32 40 48 30 30

4% 4%5%

6% 6%

8%

10%

7% 7%

0%

5%

10%

15%

0

10

20

30

40

50

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Pre-tax result* EUR million and % of sales

501 494 514 499 526 522 498 462 436200

300

400

500

600

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

SalesEUR million

*) excluding non-recurring items

• Low production volumes in Husum

due to the start-up of new folding

boxboard machine (↓)

• Lower market pulp prices (↓)

• Decrease in unprofitable paper

production (↑)

• Fixed costs and depreciation were

reallocated from non-core operations

to paperboard-segment (↑) (↓)

Q1 20165

Main result drivers in Q1 were Husum investment

programme and decreased paper production

0

10

20

30

40

Q4/2015 Paperboard Non-coreoperations

Otheroperations

Q1/2016

EBIT bridge Q4/15 vs. Q1/16excl. non-recurring items

EU

R m

illio

n

35 35

-9

+9

Q1 20166

Growing paperboard deliveriesCAGR% in 2011–2015 has been 9%

191 197 210 203 204 213 224 224 227

112 110120

111130

141 137 131 142

0

60

120

180

240

300

360

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Folding boxboard Fresh forest fibre linerboard1,000 tonnes

Note! Figures exclude wallpaper deliveries

Profitability impacted by Husum investment

programme

ROCE-%, excl. non-recurring items

Q1 20167

EBIT-%, excl. non-recurring items

4,8

6,4

9,1

11,3

8,3

0

2

4

6

8

10

12

2012 2013 2014 2015 Q1/2016

3,6

5,2

6,8

9,0

8,0

0

2

4

6

8

10

2012 2013 2014 2015 Q1/2016

Target over 12% from 2017

61 60 6551

42

16% 15% 16%13%

11%

-2%

1%

4%

7%

10%

13%

16%

0

20

40

60

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

0

100

200

300

400

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

• Stable sales development

• Operating result was negatively impacted by

– Low production volumes in pulp and folding boxboard in Husum

– Decrease in market pulp prices

– Increased depreciation

– Fixed costs reallocations from non-core segment

• Pulp trading to Sappi Ltd discontinued. Impact on 2016 sales is approximately EUR 60 million. No impact on 2016 result.

Q1 20168

Paperboard segment in Q1/2016

Operating result, EUR millionexcl. non-recurring items

Sales, EUR million

EU

R m

illio

nE

UR

mill

ion

Operating result

Operating result,

EBIT-%

0

50

100

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

• Paper deliveries decreased to

15 000 tonnes (Q4/2015: 65 000 and

Q1/2015: 156 000)

• Sales down to EUR 18 million

• Decreased depreciation and fixed

costs improved the segment’s result

• Metsä Board estimates, that remaining

paper production will be fully

discontinued by end of 2016

Q1 20169

Non-core operations segment in Q1/2016

-3,2 -3,4

-1,3

-8,4

0,2

-3% -3%-2%

-17%

1%

-18%-16%-14%-12%-10%-8%-6%-4%-2%0%2%

-18

-14

-10

-6

-2

2

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Sales, EUR million

Operating result, EUR millionexcl. non-recurring items

EU

R m

illio

nE

UR

mill

ion

Operating result, EUR million

Operating result, EUR million

EBIT-%

• FX rate changes had only a slight negative impact on EBIT in Q1/2016

• Hedging duration of the main foreign currency flows is 3–5 months

Q1 201610

FX exposure and sensitivities

63 %27 %

7 % 3 % USD

SEK

GBP

Othercurrencies

FX exposure by currency

Annual gross amount EUR 1.1 billionAnnual FX sensitivities

to Group EBIT before hedges

10 % strengthening of foreign currency vs. EUR

will have an impact on Metsä Board’s annual EBIT of

Currency 2016 (est.)

USD, $ EUR +60 million

GBP, £ EUR +10 million

Swedish krona EUR -30 million

Q1 201611

Growing working capital and investments had a

negative impact on cash flows

-19

92

51 74 33 56 93 66

-22

-24

78

46 56 9 8 45 8

-76

19

114

157

198

250

214

256 247

193

-37

57

110155

188

119 118

70

-15

-100

-50

0

50

100

150

200

250

300

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Cash flow from operations, quarterly Free cash flow, quarterly

Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months

EUR million

Q1 201612

Strong balance sheet

Equity ratio, %

33%

41%39%

47%44%

0%

10%

20%

30%

40%

50%

2012 2013 2014 2015 3/16

73%70%

51%

32%

42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2012 2013 2014 2015 3/16

Net gearing, %

625 597 427 333 412

3.4

2.9

1.81.2

1.5

0

1

2

3

4

0

200

400

600

2012 2013 2014 2015 3/16

Net debt, EUR million

Net debt/EBITDA (rolling 12m)

Net debt, EUR million and

Net debt/EBITDA

• In Q1/2016 the gross

investments were EUR 54 million

(Q1/15: 24) and depreciation

EUR 23 million (Q1/15: 26).

• Annual maintenance capex is

EUR 40–60 million

• Main growth capexes in 2016:

– Husum investment programme:

EUR 40 million (total EUR 170

mil.)

– Extrusion line:

EUR 23 million (total EUR 38

mil.)

– Metsä Fibre’s bioproduct mill:

EUR 25 million*

Q1 201613

Capital expenditure

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016E

Capex Growth capex Depreciation

EUR million

*) investment in equity

• Total investment value is EUR 170 million

• Total annual EBIT impact EUR 50 million, full

impact in 2018

• Low production volumes in pulp and folding

boxboard in H1 2016

Q1 201614

Impacts of Husum investment

programme

• Healthy demand in fresh forest fibre paperboards

expected to continue

• Total delivery volumes in paperboard expected to

grow compared to Q1/2016

• Q2 profitability will be impacted by

– Start-up phase including low average price of new folding

boxboard from Husum

– Higher number of maintenance shutdowns vs. Q1

• Total production costs are expected to remain

stable

Q1 201615

Outlook for Q2

Metsä Board’s operating result

excluding non-recurring items

in Q2/2016 is expected to

remain roughly on the same

level as in Q1/2016

Q1 201616

Profit guidance

for Q2/2016

• Q1 result remained on the same level as in Q4

• Sales expected to grow from Q2 onwards

• All-time-high delivery volumes in paperboard

• Finnish paperboard mills were operating at full

speed

• New folding boxboard machine in Husum started

in February, quality targets have been reached

• Market situation expected to remain stable

Q1 201617

Summary

Appendix

Q1 201619

Financials in Q1/2016

Q1/16 Q4/15Change

Q1/16

vs. Q4/15Q1/15

Change

Q1/16

vs. Q1/15FY 2015

Sales EUR million 436 462 ↓ 526 ↓ 2 008

EBITDA, excl. NRIs EUR million 58 60 ↓ 70 ↓ 283

% of sales % 13 13 13 14

Operating result, excl. NRIs EUR million 35 35 43 ↓ 180

% of sales % 8 8 8 9

Result before taxes, excl. NRIs EUR million 30 30 32 ↓ 150

Earnings per share EUR million 0.07 0.07 0.09 ↓ 0.39

ROCE, excl. NRIs % 8 8 11 ↓ 11

Gross investments EUR million 54 61 ↓ 24 ↓ 178

Cash flow from operations EUR million -22 66 ↓ 33 ↓ 247

Q1 201620

Price development in folding boxboard and

white-top kraftliner in 2009 – Q1/2016

Sources: Pöyry Management Consulting ja FOEX Indexes Ltd

EUR/ ton

Folding boxboard White-top kraftliner

Q1 201621

Pulp price development (PIX)

2010 – Q1/2016

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

'10 '11 '12 '13 '14 '15 '16

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR

Hardwood, EUR

Hardwood, USD

USDEUR

• Other operations segment include costs

which are not allocated to units, e.g. head

office costs and hedge accounting

• Cost base of these is roughly EUR 5 million

per quarter

• Result fluctuation is mainly caused by

hedge accounting; in Q1/2016 hedge

accounting had only a small impact on

segment’s operating result

Q1 201622

Other operations segment in Q1/2016

-14

-9 -9-8

-7

-15

-10

-5

0

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Operating result,

excl. non-recurring itemsEUR

million

Q1 201623

EBITDA development,excl. non-recurring items

6252

62 6170 73

81

60 58

12%

11%

12% 12%

13%

14%

16%

13% 13%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

10

20

30

40

50

60

70

80

90

100

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

EU

R m

illio

n

Q1 201624

Net financial costs are declining steadily

47 56 39 32 5 3,0

3,5

4,0

4,5

5,0

5,5

0

20

40

60

2012 2013 2014 2015 Q1/16

Net financial costs, EUR million

Average interest rate, %

EUR million Q1/16 Q1/15 FY2015

Financial income and

expenses-6.5 -7.2 -28.6

Net FX gains and

losses1.6 -3.8 -3.4

Total net financials -4.9 -11.0 -32.0

Avg. interest

rate, %3.7% 3.8%

EUR million %

Q1 201625

Debt structure and liquidity31 March 2016

32 %

29 %

23 %

11 %5 %

Bonds

Loans fromfinancialinstitutions

Pension loans

Finance leasesand other loans

Other short-termloans

63 %22 %

15 %Cash and cashequivalents

Revolving creditfacility

Unraised pensionloans

Debt structure,

total EUR 694 million

Available liquidity,

total EUR 447 million

Average repayment time of long-term borrowing at 31 March in 2016 was 2.3 years.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1/2016

Q1 201626

Standard & Poor’s raised Metsä Board 's credit rating

to BB+ and outlook to positive

Moody’s

Standard & Poor’s

BB+ | Ba1

Stable

Positive

BB | Ba2

BB- | Ba3

B+ | B1

B | B2

B- | B3

CCC+ | Caa1

CCC | Caa2

Q1 201627

Ownership structure on 31 March 2016

42 %

20 %

17 %

12 %

5 %

2 % 2 %

MetsäliittoCooperative

Foreigners*

Households

Public sectororganisations

Finance andinsurancecompaniesNon-profitorganisations

Othercompanies

62 %14 %

10 %

7 %

4 %

2 % 1 %

MetsäliittoCooperative

Public sectororganisations

Households

Foreigners*

Non-profitorganisations

Finance andinsurancecompaniesOther companies

Shares, %

(total no. of shares 355,512,746)Votes, %

(total no. of votes 1,037,530,115)

* incl. nominee registeredSource: Euroland