metsä board q3 2016 interim report presentation

Metsä BoardInterim reportJanuary–September 2016

• Healthy market situation in fresh fibrepaperboards

• Growing delivery and production volumes• Fine paper production ended in July and

wallpaper base production in September• Solid performance in Finnish mills, Husum

impacted profitability negatively• Cash flow from operations was clearly

positive

Performance in Q3/2016

2 Interim report 1-9/2016

Paperboard deliveries grew due to the healthy demand

CAGR% in deliveries in 2011–2015 has been 9% / year

197 210 203 204 213 224 224 227 250 266

110120 111 130 141 137 131 142

148 148

0

60

120

180

240

300

360

420

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

Folding boxboard Fresh fibre linerboard

1,00

0to

nnes

Note! Figures do not include wallpaper deliveries

Change in paperboarddeliveries:

+4% Q3/16 vs.Q2/16

+15% Q3/16 vs.Q3/15


Sales increased, operating profit negatively impactedby Husum

Sales,EUR million

Comparable operating resultEUR million

514 499 526 522 498 462 436 423 4400

100

200

300

400

500

600

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

35 37 43 47 55 35 35 36 340

10

20

30

40

50

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

Q1-Q3/2015:1,545 M€

____________

Q1-Q3/2016:1,299 M€

____________

Q1-Q3/2015:145 M€

____________

Q1-Q3/2016:105 M€


Profitability development

Comparable ROCE, % Comparable operating profit of sales, %

6,4

9,1

11,3

13,0

8,3 8,5 8,0

0

2

4

6

8

10

12

14

2013 2014 2015 Q3/15 Q1/16 Q2/16 Q3/16

5,2

6,8

9,0

11,0

8,08,5

7,7

0

2

4

6

8

10

12

2013 2014 2015 Q3/15 Q1/16 Q2/16 Q3/16

Target over 12% from 2017


• Delays in deliveries in Q3 due to the– Bottlenecks in the finishing area (Q2/2016)– Leak in the pulp mill’s recovery boiler

(Jun-Jul/2016)

• Efficiency improvement programme is progressing asplanned

• Investment programme targets– Full capacity of FBB machine is reached by end of 2016– Annual EBIT improvement of €50 million from 2018

onwards

• Healthy price level in order intake, but long lead timewill postpone positive profit impact

Ramp-up phase of folding boxboardmachine in Husum is going forward

6

0

200

400

600

800

1000

1200

1400

Production (packed net) 7 days rolling average Monthly/Quarterly average

Steadily increasing production volumes in Q3

Q1/2016Q2/2016

Q3/2016

July August September

Daily production volumes in Husum’s new FBB machine, tonnes

tonn

es


60

65

70

75

80

85

90

95

100

105

EBIT breakeven at 75% capacity utilization Received orders €/t Invoicing €/t

Price level of current order intake in Husum FBBindicates EBIT breakeven with 75% capacity utilization

8

July August September October

Trendlines from weekly data:

Indexed price development ofreceived orders and invoicing ofHusum’s FBB

Interim report 1-9/2016

• Total FX impact in Q3 2016 vs.Q2 2016 was slightly positive• Hedging duration of the main foreign currency flows is currently 5-6 months

FX exposure and sensitivities

58 %32 %

6 %4 % USD

SEK

GBP

Othercurrencies

FX exposure by currencyAnnual gross amount EUR 1.1 billion

Annual FX sensitivitiesto Group EBIT before hedges

10 % strengthening of foreign currency vs. EURwill have an impact on Metsä Board’s EBIT of

Currency Next 12 months

USD, $ EUR +60 million

GBP, £ EUR +5 million

Swedish krona EUR -30 million


Decrease in working capital and smaller investmentsturned the cash flows clearly positive

51 74 33 56 93 66

-22 -22

6746 56 9 8 45 8

-76-50

49

157

198

250

214

256 247

193

11589

110

155188

119 11870

-15

-73 -69-100

-50

0

50

100

150

200

250

300

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

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

EUR million


Positive cash flow decreased net debt

597 427 333 344 412 541 488

2.9

1.8

1.2 1.2

1.5

2.1 2.1

0

1

2

3

4

0

200

400

600

2013 2014 2015 9/15 3/16 6/16 9/16

Interest-bearing net debt, EUR million

Interest-bearing net debt / EBITDA (rolling 12m)

Interest-bearing net debt / EBITDA

597 427 333 344 412 541 488

70%

51%

32% 34%42%

54%49%

00,10,20,30,40,50,60,70,8

0

200

400

600

2013 2014 2015 9/15 3/16 6/16 9/16

Interest-bearing net debt, € million

Net gearing-%

Net gearing, %


• Estimated total capex in 2016 was revisedfrom €135 to €165 million due to a costoverrun in Husum investment programmeand changes in capex allocations betweenyears of the extrusion coating line

• In Jan–Sep 2016 total capex was €119million

• Main growth capexes in 2016 includeHusum investment programme, extrusioncoating line and equity investment in MetsäFibre’s bioproduct mill

Estimated total capex in 2016 has been revisedto €165 million

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016E

Capex Growth capex Depreciation

€ million


• Positive market situation in fresh fibre paperboard– Stable or increasing market prices

• Metsä Board’s paperboard delivery volumes expectedto remain stable

• Healthy price level in the order intake of Husum’s newFBB, but long lead time postpones the profit impact

• Extended annual maintenance shutdown in Husum inQ4 increases costs

• Revised estimate for total investments in 2016 is€165 million

Near-term outlook


Metsä Board’s comparableoperating result in the fourthquarter of 2016 is expected toremain roughly on the same levelas in the third quarter of 2016.

Profit guidancefor Q4/2016


• Q3 result was as expected:– Delivery and production volumes increased– Husum still impacted the profitability– Cash flow from operations clearly positive

• Fine paper production ended in July andwallpaper base production in September

• Stable profit development expected tocontinue in Finnish mills

• Profitability in Husum will improve• Long-term financial targets are unchanged

Summary


Appendix

Key financials

Q3/16 Q2/16ChangeQ3/16

vs. Q2/161-9/16 1-9/15

Change1-9/16

vs. 1-9/15

Sales € million 440 423 4% 1,299 1,545 -16%

EBITDA, comparable € million 59 61 -3% 178 224 -20%

% of sales % 13.5 14.4 13.7 14.5

Operating result, comparable € million 34 36 -6% 105 145 -28%

% of sales % 7.7 8.5 8.1 9.4

Result before taxes, comparable € million 27 27 84 120 -30%

Earnings per share € 0.07 0.07 0.21 0.27 -22%

ROCE, comparable % 8.0 8.5 8.3 12.1

Gross investments € million 16 48 -67% 119 117 2%

Cash flow from operations € million 67 -22 23 181 -87%


Comparable EBITDA

52 62 61 70 73 8160 58 61 59

11%12% 12%

13%14%

16%

13% 13%14% 14%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

20

40

60

80

100

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

EBITDA, EUR million EBITDA, %


Long-term debt and financial costs

Net financial costs (€ million) andaverage interest rate (%)

Maturity schedule in long-term IB debt€ million

47 56 39 32 21

5,2%

4,6%

4,2%

3,8%

3,3%

2,5

3,0

3,5

4,0

4,5

5,0

5,5

0

10

20

30

40

50

60

2012 2013 2014 2015 Q1-3/2016

Net financial costs, € million

Average interest rate at the end of period, %

17

155

34

256

173

10065

0

50

100

150

200

250

300

2016 2017 2018 2019 2020 2021 >2022

Long-term interest bearing liabilities, € million

Committed undrawn credit facilities, € million


Debt structure and liquidity30 September 2016

222

199

144

20

108Bonds

Loans fromfinancial institutions

Pension loans

Finance leases andother loans

Other short-termloans

202

100

65Cash and cashequivalentsRevolving creditfacility

Unraised pensionloans

Debt structure,total EUR 693 million

Available liquidity,total EUR 367 million

Average maturity of long-term loans at 30 September in 2016 was 2.4 years.20 Interim report 1-9/2016

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

Metsä Board 's credit rating

Moody’sStandard & Poor’s

BB+ | Ba1

Stable

Positive

BB | Ba2

BB- | Ba3

B+ | B1

B | B2

B- | B3

CCC+ | Caa1

CCC | Caa2


500

600

700

800

900

1000

1100

2009 2010 2011 2012 2013 2014 2015 2016

Taivekartonki Valkopintainen kraftlaineri

Market price development in folding boxboardand white-top kraftliner in Europe

Sources: Pöyry Management Consulting ja FOEX Indexes Ltd

EUR/ tn

Folding boxboard White-top kraftliner


Pulp price development (PIX)

350

400450

500

550

600650

700

750

800850

900

950

10001050

'10 '11 '12 '13 '14 '15 '16350

400450

500

550

600650

700

750

800850

900

950

10001050

Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR

Hardwood, EUR

Hardwood, USD

USDEUR


Market cap and foreign owners30 September 2016

Ownership distribution30 September 2016

Market cap and ownership distribution

0

4

8

12

16

20

24

0

500

1 000

1 500

2 000

2 500

2012 2013 2014 2015 9/2016

Market cap, EUR million

Share of foreign owners, %

42 %

25 %

18 %

15 % MetsäliittoCooperative

Domestic institutionalinvestors

Domestic privateinvestors

Foreign owners

EUR million

*) Metsäliitto Cooperative has 62% of the voting rights

*)

24

%


25

Metsä Board is a world leaderfor corporate action on climatechange

• Metsä Board was awarded a position onthe Climate A List by CDP

• Only 9% of corporations participating to beawarded on the list

• In 2015 a position on the Water A List and aleadership status in Forest programme

• Investments in bioenergy, as well as energy andmaterial efficiency

• Fossil CO2 emissions have decreased by 42%since 2009

• More than 80% of the fuels used are bio-based.Interim report 1-9/2016

• Metsä Board’s fresh fibre paperboard was usedin three prize-winning paperboard packages,including– the award of the Carton of the Year– the winners in Food and Beauty & Cosmetics

categories

26

Metsä Board’s high-qualitypaperboards well recognised inPro Carton ECMA Awards


metsä board q3 2016 interim report presentation

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