metsa-group-president-and-ceo-kari-jordan-interim-report-q3
TRANSCRIPT
Metsä Group Interim Report Q3/2016
Kari JordanPresident and CEO
2.11.2016
• Sales EUR 3,483 million (1–9/2016: EUR 3,811 million)• Comparable operating result EUR 332 million (EUR 415
million), or 9.5% of sales (10.9%) • Comparable return on capital employed 10.5% (14.2%) • Comparable operating result compared to previous year was
affected by lower market price and sales volume of pulp as well as the start-up phase of the new folding boxboard production line at Metsä Board’s Husum mill
2.11.20162
Business developed as expected
Metsä Group – Q3
• Supply of wood was steady and stumpage prices remained stable• Market price of long-fibre pulp increased by 2 per cent and the
price of short-fibre pulp fell by 3 per cent from previous quarter• Delivery volumes of Kerto® LVL continued to grow strongly in
Australia and North America• Market situation and price levels of paperboard remained stable• Metsä Wood’s EUR 100 million investment programme in plywood
and Kerto® LVL products progressed as planned• Kyro mill’s wallpaper base machine was closed down in September• Finnish sawmills were transferred to Metsä Fibre on 1 Nov. 2016• Construction of bioproduct mill in Äänekoski progressed as planned
– Nearly 75 per cent of the project was ready at the end of September– Workforce per day nearly 2,000 people
2.11.20163
Events in the third quarter
Metsä Group – Q3
2.11.20164
Sales quarterly
Metsä Group – Q3
EUR million
1 264 1 242 1 214 1 219 1 254 1 2651 204
1 248 1 2551 330
1 225 1 2051 156 1 184 1 143
0
200
400
600
800
1 000
1 200
1 400
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
8994
7387
10592
104117
129137
149
123109
120
10394 89
63
88
70
160
103
84
118
154
142128
107119
107
0
20
40
60
80
100
120
140
160
180
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
Comparable operating result Operating result (IFRS)
2.11.20165
Operating result
Metsä Group – Q3
EUR million
2.11.20166
Comparable operating result
Metsä Group – Q3
EUR million
130119
63
3
5364 68 71
89 94
73
87
10592
104117
129137
149
123
109120
103
0
20
40
60
80
100
120
140
160
Q1/
11
Q2/
11
Q3/
11
Q4/
11
Q1/
12
Q2/
12
Q3/
12
Q4/
12
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
Change in comparable operating result
2.11.20167
Metsä Group – Q3
EUR million
Comparable operating result 1–9/2015 415
Sales prices -200
Sales volumes -17
Exchange rates 14
Raw materials 29
Employee costs 26
Depreciation and others 20
Change of inventories 45 -83
Comparable operating result 1–9/2016 332
Items affecting comparability Q1–Q3/2016
8
Metsä Group – Q3
2.11.2016
EUR million Q1–Q3/2016
Operating result (IFRS) 332.7
Items affecting comparability:
Metsä Wood / Additional expenses related to divestment of Metsä Wood France S.A.S. -0.4
Metsä Board / Restructuring of Simpele paperboard mill -1.8
Metsä Board / Loss related to divestment of Alrec Boiler Oy -1.1
Metsä Board / Organisation of Benelux sales office -0.7
Metsä Board / Items related to paper production at Kyro -9.2
Metsä Fibre / Sales profit related to Metsä-Botnia Metsät Oy 11.7
Metsä Tissue / Cancellation of the restructuring provision 2.0
Items affecting comparability total 0.5
Comparable operating result 332.1
9
Comparable ROCE
Metsä Group – Q3
%
Target >10%
2.11.2016
6.9
9.0
11.1
14.2
10.5
0
2
4
6
8
10
12
14
16
Q1–Q3/2012 Q1–Q3/2013 Q1–Q3/2014 Q1–Q3/2015 Q1–Q3/2016
2.11.201610
Equity ratio
Metsä Group – Q3
%
34.737.9 37.9
43.2 44.0
0
5
10
15
20
25
30
35
40
45
50
12/2012 12/2013 12/2014 12/2015 9/2016
11
Interest-bearing net liabilities
Metsä Group – Q3
EUR million
2.11.2016
1 6091 510
938
610
991
0
250
500
750
1 000
1 250
1 500
1 750
2 000
12/2012 12/2013 12/2014 12/2015 9/2016
12
Capital expenditure
Metsä Group – Q3
EUR million
2.11.2016
204 214 143
492 540
0
100
200
300
400
500
600
700
800
900
1000
1–12/2012 1–12/2013 1–12/2014 1–12/2015 1–9/2016
Full-yearestimate
Income statement
13
Metsä Group – Q3
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015 ChangeSales 3 482.7 3 810.6 -327.8
Other operating income 52.3 78.8 -26.5
Operating expenses -3 011.6 -3 277.5 266.0
Depreciation and impairment losses -190.8 -197.9 7.1
Operating result 332.7 413.9 -81.3
Comparable operating result 332.1 414.7 -82.6
Share of results from associated companies and joint ventures -1.4 8.5 -9.9
Exchange gains and losses 0.8 -3.8 4.5
Other net financial items -56.5 -63.7 7.1
Result before taxes 275.5 355.0 -79.5
Key figures
14
Metsä Group – Q3
2.11.2016
Q1–Q3/2016 Q1–Q3/2015 ChangeReturn on capital employed, % 10.6 14.2 -3.6
Comparable return on capital employed 10.5 14.2 -3.7
Return on equity, % 11.5 16.0 -4.5
Comparable return on equity 11.5 16.2 -4.7
Equity ratio, % 44.0 42.7 1.3
Net gearing ratio, % 40 29 11
Interest-bearing net liabilities, EUR million 991 682 309
Capital expenditure, EUR million 540 296 244
Personnel at end of period 9 451 9 824 -373
Cash Flow Statement I
15
Metsä Group – Q3
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015
Cash flow from operating activities
Result for the period 211.7 263.6
Adjustments to result for the period 267.8 308.9
Interest received 2.3 2.5
Interest paid -33.1 -46.7
Dividends received 1.0 3.7
Taxes -98.2 -65.0
Other financial items, net 6.3 -10.2
Change in working capital -181.3 53.8
Net cash flow from operating activities 176.4 510.6
Cash Flow Statement II
16
Metsä Group – Q3
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015Net cash flow from operating activities 176.4 510.6
Purchase of shares 0.0 -0.8Investments -540.2 -295.6Sales of assets and others 49.2 38.9Changes in members' capital and other capital 48.9 94.2Interest on members' capital and dividends paid -120.2 -94.9Change in long-term loans and committed facilities 64.9 -190.6
Change in cash and cash equivalents -321.0 61.7
Cash and cash equivalents at beginning of the period 1 120.8 947.9Translation differences and others 0.7 -0.2Change in cash and cash equivalents -321 61.7
Cash and cash equivalents at end of the period 800.5 1 009.4
17
Personnel
Metsä Group – Q3
2.11.2016
11 44710 736 10 410
9 599 9 451
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
12/2012 12/2013 12/2014 12/2015 9/2016
Wood Supply and Forest Services
Wood Supply and Forest Services
19
Metsä Forest – Wood Supply and Forest Services
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015 Change
Sales 1 135.2 1 153.2 -18.0
Other operating income 5.4 6.2 -0.8
Operating expenses -1 116.0 -1 134.0 18.0
Depreciation and impairment losses -2.5 -2.7 0.2
Operating result 22.0 22.7 -0.7
Items affecting comparability, total - - -
Comparable operating result, EUR million 22.0 22.7 -0.7
% of sales 1.9 2.0 -0.1
Popularity of electronic services increases• Supply of wood was steady and stumpage
prices remained stable• Metsä Forest delivered a total of 22.7 million
cubic metres of wood (22.8)• Wood was harvested as targeted and deliveries
to customers' production units were carried out as planned
• Sales of forest management services continued at a good level
• Nearly 20% of wood acquired from private forests was purchased electronically
• Nearly 25% of forest management services was sold electronically
20
Comparable operating result EUR million
Metsä Forest – Wood Supply and Forest Services
2.11.2016
8.6
7.0
4.5
8.18.7
6.9 7.06.3
7.8
6.5
7.7
0
1
2
3
4
5
6
7
8
9
10
Q1/
14
Q2/
14
Q3/
14
Q4/
14
Q1/
15
Q2/
15
Q3/
15
Q4/
15
Q1/
16
Q2/
16
Q3/
16
Q4/
16
Wood Products Industry
Wood Products Industry
22
Metsä Wood – Wood Products Industry
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015 ChangeSales 631.6 664.3 -32.7
Other operating income 7.0 4.4 2.6
Operating expenses -594.4 -643.7 49.3
Depreciation and impairment losses -23.3 -23.6 0.3
Operating result 20.9 1.4 19.5
Items affecting comparability, total 5.5 22.5 -17.0
Comparable operating result, EUR million 26.4 23.9 2.5
% of sales 4.2 3.6 0.6
Growth in delivery volumes of Kerto® LVL products • Delivery volumes of Kerto® LVL continued to grow
strongly in Australia and North America. Demand was strong in other markets too
• Profitability of sawing operations was weaker than in comparison period due to declined prices
• Deliveries of sawn pine timber remained clearly below the deliveries of the comparison period.
• Delivery volumes and sales in plywood products decreased
• Investment programme of EUR 100 million related to the Kerto® LVL and plywood operations announced in June progressed as planned
• At the beginning of November Metsä Wood's sawmills in Finland transferred to Metsä Fibre
23
Comparable operating result EUR million
Metsä Wood – Wood Products Industry
2.11.2016
8.6
14.4
6.2
8.0 7.9
10.2
5.9
7.5
5.8
14.4
6.2
0
2
4
6
8
10
12
14
16
Q1/
14
Q2/
14
Q3/
14
Q4/
14
Q1/
15
Q2/
15
Q3/
15
Q4/
15
Q1/
16
Q2/
16
Q3/
16
Q4/
16
Pulp Industry
Pulp Industry
25
Metsä Fibre – Pulp Industry
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015 ChangeSales 962.9 1 071.1 -108.2
Other operating income 20.5 12.9 7.6
Operating expenses -762.0 -778.0 16.0
Depreciation and impairment losses -44.9 -49.3 4.4
Operating result 176.6 256.7 -80.1
Items affecting comparability, total -11.7 - -11.7
Comparable operating result, EUR million 164.9 256.7 -91.8
% of sales 17.1 24.0 -6.9
Metsä Group26
Price of pulp (PIX) 2008–Q3/2016
Metsä Fibre – Pulp Industry
USD EUR
Source: FOEX Indexes Ltd
2.11.2016
350
450
550
650
750
850
950
1050
350
450
550
650
750
850
950
1050
'08 ´09 ´10 ´11 ´12 ´13 ´14 ´15 ´16
Hardwood/EUR Softwood/EUR Hardwood/USD Softwood/USD
Currency-denominated market prices of pulp on a lower level than previous year• Currency-denominated market prices of long-
fibre pulp were 8% and of short-fibre pulp 9% lower than in corresponding period previous year
• Price of long-fibre pulp in Europe was USD 794 per tonne at the beginning of January and USD 810 at end of review period
• Price of short-fibre pulp was USD 781 and USD 664 respectively
• Metsä Group’s sawmills in Finland transferred to Metsä Fibre on 1 November to utilise the industrial synergies even better
• Construction of bioproduct mill in Äänekoski progresses as planned
Metsä Group27
Comparable operating result EUR million
Metsä Fibre – Pulp Industry
2.11.2016
54.9
36.3
51.8
64.5
78.7
92.585.5
80.5
63.7
52.0 49.2
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
Q2/
16
Q3/
16
Q4/
16
Paperboard Industry
Paperboard Industry
29
Metsä Board – Paperboard Industry
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015 ChangeSales 1 298.5 1 545.3 -246.8
Other operating income 28.6 37.8 -9.2
Operating expenses -1 151.5 -1 339.7 188.2
Depreciation and impairment losses -81.9 -78.5 -3.4
Operating result 93.8 164.9 -71.1
Items affecting comparability, total 10.9 -20.1 31.0
Comparable operating result, EUR million 104.7 144.8 40.1
% of sales 8.1 9.4 -1.3
30
Prices of folding boxboard and white-top krafliner in Europe 2010–Q3/2016
Metsä Board – Paperboard Industry
EUR/tonne
Sources: Pöyry Management Consultingand FOEX Indexes Ltd.
2.11.2016
600650700750800850900950
100010501100
2010 2011 2012 2013 2014 2015 2016
Folding boxboard White-top kraftliner
Result development affected by start-up of Husum’s new folding boxboard production line
• Total delivery volume of folding boxboard and white fresh fibre linerboard increased 13% compared to corresponding period previous year
• Sales were reduced due to the planned major decrease in paper deliveries
• Operating result was weakened by start-up of Husum’s new paperboard production line which affected production volumes of pulp and paperboard and lower average price of start-up volumes as well as fluctuations in pulp prices
• Wallpaper base machine at Kyro mill was closed down in September
31
Comparable operating result EUR million
Metsä Board – Paperboard Industry
2.11.2016
36.1
28.3
35.2 36.9
43.247.0
54.6
35.1 35.0 35.834.0
0,0
10,0
20,0
30,0
40,0
50,0
60,0
Q1/
14
Q2/
14
Q3/
14
Q4/
14
Q1/
15
Q2/
15
Q3/
15
Q4/
15
Q1/
16
Q2/
16
Q3/
16
Q4/
16
Tissue and Cooking Papers
Tissue and Cooking Papers
33
Metsä Tissue – Tissue and Cooking Papers
2.11.2016
EUR million Q1–Q3/2016 Q1–Q3/2015 ChangeSales 741.6 751.9 -10.3
Other operating income 2.5 2.9 -0.4
Operating expenses -670.0 -706.4 36.4
Depreciation and impairment losses -29.7 -30.8 1.1
Operating result 44.5 17.7 26.8
Items affecting comparability, total -2.0 18.9 -20.9
Comparable operating result, EUR million 42.5 36.6 5.9
% of sales 5.7 4.9 0.8
Improved sales mix and lower costs increased operating result from previous year• Sales mix improved and costs of energy and
logistics were lower than in previous year• Sales were reduced primarily by lower sales
volumes as a result of discontinuation of the tissue paper operations in Russia. Also the exchange rate changes reduced sales
• During the third quarter, a greaseproof paper machine in Mänttä was renewed
• SAGA Baking Form, containing no plastic or aluminum, made from corrugated board and baking paper to the Finnish market
34
Comparable operating result EUR million
Metsä Tissue – Tissue and Cooking Papers
2.11.2016
11.8
9.7
19.621.1
15.8
7.6
13.2
18.6
13.5 13.2
15.8
0,0
5,0
10,0
15,0
20,0
25,0
Q1/
14
Q2/
14
Q3/
14
Q4/
14
Q1/
15
Q2/
15
Q3/
15
Q4/
15
Q1/
16
Q2/
16
Q3/
16
Q4/
16
Summary
Outlook for the business areas 1/2Wood Supply and Forest Services• Wood demand will focus primarily on spruce logs, thinning sites to be harvested when the ground is
unfrozen and, in energy wood, on crown wood• Uncertainties related to Act on the Financing of Sustainable Forestry will have a negative impact on
demand for forest management services
Wood Products Industry • Competition is intensifying as a result of new investments• In sawn timber, demand in Asia will support the market balance of spruce sawn timber. In pine sawn timber
the oversupply will continue• Demand for board products is expected to experience slight seasonal weakening. Construction in the UK
is expected to remain at a good level
Pulp • No signs of considerable changes in market conditions. New capacity will enter the markets, but global
demand for pulp is expected to continue to growing. The capacity utilization rates of Metsä Fibre's pulp mills are expected to be at a good level in the last quarter of the year
36
Metsä Group – Q3 2016 Summary
2.11.2016
Outlook for the business areas 2/2Paperboard• Demand for high-quality fresh fibre paperboards is expected to remain good in both Europe and the
Americas. Metsä Board's paperboard deliveries in October–December are expected to remained at the same level as in the previous quarter
• Market prices of folding boxboard and fresh fibre white linerboards are expected to remain stable or increase slightly
• Metsä Board's fourth-quarter result will be weakened by the annual maintenance shutdown at the Husum integrated mill
Tissue and Cooking Papers• Demand is expected to remain stable in all tissue and cooking paper market areas • Demand for tissue paper is expected to increase particularly in eastern Central Europe, and demand for
cooking papers is expected to grow in Asia
37
Metsä Group – Q3 2016 Summary
2.11.2016
• Metsä Group’s comparable operating result is in the last quarter of 2016 expected to be roughly at a similar level as in the third quarter of 2016
2.11.201638
Near-term outlook
Summary
