Metsä Fibre –Strong fibre expertise

Ilkka HämäläCEO, Metsä Fibre

Metsä BoardCapital Markets Day 2017

• Metsä Fibre in brief and market

position

• Market pulp update

• Äänekoski Bioproduct mill

• Summary

2017 CMD Hämälä2

Contents

• Producing high-quality northern bleached softwood and

birch pulp

• 4 pulp mills in Finland and 7 sawmills in Finland and

Russia

• New bioproduct mill will rise the total pulp capacity from

2.5 Mt/a (in 2017) to 3.3 Mt/a (in 2018)

• Sales in 2016*) were EUR 1.6 billion and comparable

operating result EUR 215 million

• Owners: Metsäliitto Cooperative 50.2%, Metsä Board

24.9%, Itochu Corporation 24.9%

3

Metsä Fibre – a leading producer of

bioproducts and bioenergy

*) Include the full year figures from Finnish sawmills

2017 CMD Hämälä

Excluding fluff and dissolving pulp

2017 CMD Hämälä4

0 500 1000 1500 2000 2500 3000

Resolute Forest Products

Domtar

Södra

Paper Excellence Group

Mercer International

Arauco

Georgia-Pacific

Stora Enso

International Paper

Metsä Group

Metsä Group is the leading producer in

chemical softwood pulp globally

Annual capacities, 1,000 tonnes Increase from new Äänekoski Bioproduct Mill

Source: Pöyry Management Consulting

Excluding fluff and dissolving pulp

2017 CMD Hämälä5

0 500 1000 1500 2000 2500

Resolute Forest Products

Canfor

Domtar

Stora Enso

International Paper

Södra

Paper Excellence Group

Mercer International

Arauco

Metsä Group

Metsä Group is the leading producer in

chemical softwood market pulp globally

Annual capacities, 1,000 tonnes Increase from new Äänekoski Bioproduct Mill

Source: Pöyry Management Consulting

Market BSKP (Bleached softwood kraft pulp)

6

Industry structure with new

Äänekoski Bioproduct Mill

Source: Pöyry Management Consulting Oy Technical age, years

Weighted average bleached kraft pulp capacity**, 1 000 t/a

STRONG

Weighted average technical

age 21,5 yearsWEAK

Bubble size reflects the

allocated grade capacity

** = based on the grade allocation

in Pöyry’s Smart

Metsä

Fibre

Weighted average

capacity 546 000 t/a

1000

800

600

400

200

030 25 20 15 10 5 0

2017 CMD Hämälä

The most cost competitive and efficient player in the industry

7

4

4

4

1

1

1

3

3 3

2

2

2

0

200

400

600

800

1,000

0 5,000 10,000 15,000 20,000 25,000

Cost Competitiveness* in RotterdamMarket BSKP – Selected ProducersUSD/t

**)Capital charges include straight-line depreciation and ROCE 10,0%

Operating rate 100%

1 Metsä Fibre, Joutseno

2 Metsä Fibre, Kemi

3 Metsä Fibre, Rauma

4 Metsä Fibre, Äänekoski (new BPM)

Full Costs **)

Delivered Costs

to Rotterdam

Manufacturing

Costs

2016/IV

Cumulative capacity, 1000 t/a

1 USD=0.95 EUR

1 EUR=1.05 USD

1 USD=1.33 CAD

Source: Pöyry Management Consulting

2017 CMD Hämälä

*)Based on modelled costs

Market pulp update

8

9

World market pulp shipments

by market area and forecast

2017 CMD Hämälä

Source: Hawkings Wright, Brian McClay & PPPC

10

October 2016 – March 2017

growth +1.6Mt, of which 1.1 Mt

BHKP and 0.5Mt BSKP

Source: Hawkings Wright & PPPC World-20

1,0

00 t

onnes

Bleached chemical market pulp shipments to China

2017 CMD Hämälä

Year-on-year growth

Chinese tissue and graphic paper demand Consumes 80% of all market pulp deliveries

Source: Hawkins Wright

Graphic papers:

average annual

demand growth of

1% through 2021

Tissue to remain

the dominant

driver: average

annual demand

growth of 7.5%

through 2021

-

5.0

10.0

15.0

20.0

25.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Mill

ion

to

nn

es

Tissue and specialty

Graphic

2017 CMD Hämälä

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Capacity additions in softwood and hardwood

market pulp and European benchmark price

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0

200

400

600

800

1,000

1,200

Gre

en

field

cap

acity

(millio

n tp

a)

Pu

lp p

ric

es

US

$/t

(c

if E

uro

pe

)

NBSK cif Europe

BEKP cif Europe

Valdivia

APP Guangxi

Rizhao

Tres Lagoas

Fray Bentos

Mucuri

Nueva Aldea

Santa Fe

Veracel

APP Hainan

Chenming ZhanjiangKerinci

PL3

MaranhaoMontes

del Plata

Eldorado

OJIIlim

Guaiba

Klabin

OKILine 1

Mercer Stendal

Source: Hawkins Wright

Äänekoski Bioproduct Mill

INVESTMENT, EUR

1.2 billion

ELECTRICITY, Wh/a

1.8 tera

WOOD USAGE, m3/a

6.5 million

ELECTRICITY SELF

SUFFICIENCY

240 percent

CERTIFIED WOOD

90 percent

START UP

Q3/2017

“UNIQUE BIO ECOSYSTEM

UTILIZING PRODUCTS FROM

ALL PRODUCTION STREAMS”

CAPACITY, tonnes/a

1.3 million

Äänekoski Bioproduct Mill in a Nutshell

14 2017 CMD Hämälä

Bioproduct Mill

Concept

Botnia Nordic Pulp

Bioenergy

Biochemicals

Future

Biomaterials

Ecosystem

20%other bioproducts

1.300.000tonnes of pulp

10%other

bioproducts

530.000tonnes of pulp

Existing pulp mill

New bioproduct mill (2017)

Revenue from

other bioproducts

will increase

15 2017 CMD Hämälä

16

Bioproducts beyond pulp

– Utilizing all side streams

PULPWOOD

PULP

BARK*

TURPENTINE* AND

CRUDE TALL OIL*

ODOROUS

GASES

LIGNIN

SLUDGE

CLEAN WATER

DREGS AND ASHES

BIOENERGY*:

POWER, STEAM,

DISTRICT HEATGLAUBER

SALT

PULP

GRADING

2017 CMD Hämälä

250

100

150

750

Metsä FibreShareholder capitalShareholder loanDebt

• 40% equity

• Metsä Fibre

• Increase of shareholder

capital

• Shareholder loan by Itochu

Corporation

• 60% debt financing

• Export credit guarantees by

Finnvera and EKN

• Loans by EIB and

Commercial banks: Nordea,

Pohjola Bank, Danske Bank,

DNB Bank, SEB and

Swedbank

17

Bioproduct mill financing

Financing, Meur

2017 CMD Hämälä

18

Construction schedule

month

2015 2016 2017 2018

2-3 6 9 5 Q3 mid

year

2017 CMD Hämälä

• Estimated annual income effect on the Finnish economy

approx. EUR 0.5 billion

• Increases the value of Finnish exports by EUR 0.5 billion

annually

• The mill will diversify the Finnish forestry sector and bio-

economy structures and broaden the current product portfolio

• Supports Finland in reaching its goal for renewable energy

– The bio-product mill will increase the share of renewable

energy in Finland by approx. 2 percentage points

19

Significant contribution

for the Finnish economy

2017 CMD Hämälä

• Metsä Group is the leading producer in chemical softwood

market pulp globally with excellent cost competitiveness

• Demand in softwood pulp is continuing – Biggest growth driver

is Chinese domestic consumption

• The new bioproduct mill is the biggest bioeconomy investment

in Europe

• The bioproduct mill creates sustainable growth

20

Summary

2017 CMD Hämälä