Metsä Board and other... · 2017-08-21 · 7 Jefferies conference 2017 Metsä Board operates in...

Metsä BoardPresentation material

Jussi Noponen, CFOKatri Sundström, Head of IR

Jefferies Industrials Conference 2017New York, US

Company highlights …....…….…..... 3

Husum investment programme

and update ………………………… 12

Half-year 2017 Results ……..……. 19

Operating environment ….……….. 32

Sustainability ………………………. 40

Appendix …………………………… 44

2

Contents

Jefferies conference 2017

• Focus only on premium fresh fibre paperboards

• Strong market position: Market leader in folding

boxboard in Europe and global market leader in

coated white fresh fibre linerboard

• A growth company with good profitability

• Strong fibre know-how and self-sufficiency in pulp

• Global sales to over 100 countries and eight

production units in Finland and Sweden


Metsä Board in brief

50%

25%

15%

10%

Sales split in 2016

Folding boxboardLinerboardsMarket pulpOthers

75 %

17 %

8 %

Sales split by region in 2016

EMEA

Americas

APAC

Solutions for wide variety of brand applications

In pack On shelf On display On the go In graphics

Packaging

solutions for

consumer goods

Retail ready tray

solutions

Display and

point-of-sale

solutions

Solutions for

food service

Solutions for

graphical uses


Metsä Board’s customers are brand owners, converters, merchants and

corrugated box manufacturers

Transformation into pure-play paperboard

company has increased shareholder value

Enterprise value, EUR million

0

500

1000

1500

2000

2500

3000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Net debt Market capitalization

Dividend, EUR and payout ratio, %

0%

15%

30%

45%

60%

75%

90%

0.00

0.04

0.08

0.12

0.16

0.20

2012 2013 2014 2015 2016

Dividend, € Dividend/EPS, %

5 Jefferies conference 2017

€ mill. €

Metsä Board shares (METSB, METSA) are listed on Nasdaq Helsinki

Lightweighting

• Metsä Board’s folding boxboard can be even 30% lighter compared to competing grades (SBS, WLC)

Purity and safety of fresh fibre paperboards

• Important especially for food and food service packaging

• Whiteness and quality - upscale consumer experience

Sustainability

• Fresh fibres are recyclable and renewable material

• Wood raw material is 100% traceable to sustainably managed northern forests

• Strong and recognised credentials in environmental performance, water and energy efficiency and

actions to combat climate change

Metsä Board’s paperboards have many

competitive advantages



Metsä Board operates in growing paperboard marketGlobal demand for fresh fibre paperboard is 3–4% p.a.

PAPERBOARD 5-YEAR GROWTH FORECAST EMEA Americas APAC

Folding boxboard (FBB)

Food service board (FSB)

Coated white kraftliner n/a

Uncoated white kraftliner n/a

Other fresh fibre paperboards

(eg SBS, CUK)

Recycled paperboards (eg WLC)

+2%/a or more

+1 to +2%/a

-1 to +1%/a

-1 to -2%/a

-2%/a or more

Source: Metsä Board‘s own estimate

8

Metsä Board's regional goals

GROWTH

IN THE

AMERICAS

IN THE COMING

YEARS

MAINTAIN

THE STRONG

MARKET

POSITION IN

EUROPE

FOCUS ON

PREMIUM

PAPERBOARD

SEGMENTS IN

THE ASIA-PACIFIC

REGION

AMERICASSHARE OF SALES IN 2016

17%

EMEASHARE OF SALES IN 2016

75%

APACSHARE OF SALES IN 2016

8%


Company’s growth exceeds clearly the average

market growth

9

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2012 2013 2014 2015 2016 2018 target

Fresh fibre linerboard Folding boxboard

Metsä Board’s annual paperboard deliveries, 1,000 tonnes


• Investments in January–

March were

EUR 19 million

(Q1/16: EUR 54 million)

• Estimated capex in 2017

is EUR 65–70 million,

mainly in maintenance

Harvesting time after big investments in 2015–2016

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016 2017E

Maintenance capex Growth capex Depreciation

EUR million


Main growth in capex in 2016: Husum investment programme, extrusion coating line and

equity investment in Metsä Fibre’s bioproduct mill

11

Financial targets aim for profitable growth with

efficient use of capital

Financial target Change/update Target level Actual 2016 Actual 2015 Actual 2014

Comparable

ROCEUnchanged >12% 8.1% 11.3% 9.1%

Net debt /

comparable

EBITDA

New target <2.5x 2.0x 1.2x 1.8x

Growth in

paperboard

deliveries

New target

Annual growth in

paperboard

deliveries to

exceed relevant

market growth*

12% 13% 10%

Dividend payout New target level

At least 50% of the

result for the

period 76% 44% 57%

* Estimated average market growth globally in fresh fibre paperboards is 3–4%/a

Previous target for net gearing (<70%) no longer in useJefferies conference 2017

Husum investment programmeand update


• Launched at the end of 2014

• Two paper machines closed in 2015

• One paper machine converted to produce linerboard (BM2)

• New folding boxboard machine (BM1) started up in February

2016

• Enhancements to the pulp mill and the mill site’s own port

• New extrusion coating line started up in April 2017

Folding boxboard production

• Capacity approximately 400,000 t/a

• Deliveries mainly to Americas and

food service globally

Linerboard production

• Capacity approximately 270,000 t/a

• Deliveries to Europe and Americas

Husum investment programme

Raw materialLogistics

Raw materialExtrusion

Raw materialPaperboard

Raw materialPulp

14

The integrated mill model improves efficiency and

sustainability of the supply chain

• Certified wood resources

• Own deep water port

• Own pulp mill at the mill site

• Paperboard production (BM1)

• Extrusion coating line (EM1)

Raw materialRaw materialHusum integrated mill:



Targeted sales and sales split for new paperboard

volume from Husum mill

250

150150

0

500

1,000

1,500

2,000

Deliveries in 2015 Folding boxboard toAmericas

Food service boardglobally

Linerboard toEurope andAmericas

Targeted deliveriesin 2018

A total of 400,000 tonnes

of new FBB capacity

1,0

00 tonnes

Incremental capacity

in linerboard*

* Until July 2016 the paperboard machine (BM2) produced simultaneously fine paper reels.


Most of the targeted deliveries to Americas

are produced in Husum

0

50

100

150

200

250

300

2011 2012 2013 2014 2015 2016 2018 target

Folding boxboard Fresh fibre linerboard

300

250

1,0

00 tonnes

Actual and targeted deliveries to Americas

Targeted deliveries

to Americas will

represent 25% of

total deliveries in

2018.

• Capacity utilisation rate in FBB during H1 2017 was 70%

– In June, both production and deliveries were over 85% of

monthly capacity

– The target of having the capacity in full use by end of 2018

is intact

• Production costs per tonne produced still higher

compared to Finnish mills

• Geographical sales mix burdened the average price in

FBB

• Deliveries of own PE-coated paperboards to customers

have started


Update of Husum’s folding boxboard

post H1/2017

18

Potential to improve profitability of HusumAt least EUR 100 million EBIT improvement from 2016 to 2019

2016 2019

+ EUR

25 million+ EUR

5 million+ EUR

>70 million

120,000

tonnes

of pulp

production

lost in 2016

Restructuring:

Efficiency

improvement

programme

FBB capacity

utilisation rate

>95% with

normal sales

price


Metsä Board

Half-year 2017 Financials


Key financials

Q2/17 Q1/17Change

Q2/17

vs. Q1/17H1/17 H1/16

Change

H1/17

vs. H1/162016

Sales EUR, m 474 445 +7% 919 859 +7% 1,720

EBITDA* EUR, m 68 69 -1% 136 119 +14% 231

Operating result* EUR, m 44 45 -2% 89 71 +25% 138

% of sales % 9.2 10.2 9.7 8.2 8.0

Result before taxes* EUR, m 37 40 -8% 77 57 +35% 107

Earnings per share EUR 0.09 0.10 -10% 0.19 0.13 +46% 0.25

ROCE* % 10.3 10.6 10.3 8.4 8.1

Capex EUR, m 12 19 -37% 31 103 -70% 162

Cash flow from operations EUR, m 37 26 +42% 63 -45 77

IB Net debt, at end of period EUR, m 495 458 +8% 495 541 -9% 464

Personnel, at end of period 2,581 2,450 +5% 2,581 2,762 -7% 2,466

*comparable

• Good demand for high-quality paperboards

continued

• Stable or rising market price levels

• Metsä Board’s paperboard deliveries up by 11%

from Q1 2017

• The average price of folding boxboard was

burdened by Husum’s geographic sales mix

• Steady working capital despite the strong sales

growth

• New extrusion coating line in Husum started up


Q2 2017 in summary

All-time high in paperboard deliveries

204 213 224 224 227 250 266 245 265304

130141 137 131 142

148148

143163

173

0

100

200

300

400

500

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

Folding boxboard White fresh fibre linerboard

1,0

00

to

nn

es

Growth in total paperboard

deliveries:

+11% Q2/17 vs. Q1/17

+18% H1/17 vs. H1/16

+12% FY16 vs. FY15


FY 2015:

1.4m tonnes

FY 2016:

1.6m tonnes

Sales and operating result

SalesEUR million

436 423 440 422 445 4740

100

200

300

400

500

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17

+7%

35 36 34 33 45 44

8.0 %8.5 %

7.7 % 7.8 %

10.2 %

9.2 %

0%

2%

4%

6%

8%

10%

12%

0

10

20

30

40

50

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17

+25%


Comparable operating resultEUR million and %

H1 2016:

EUR 859 million

EU

R m

illio

n

EU

R m

illio

n

H1 2017:

EUR 919 million

H1 2016:

EUR 71 million

H1 2017:

EUR 89 million

45 44

0

10

20

30

40

50

Q1 2017 Q2 2017

Comparable operating result, EUR millionQ2 2017 vs. Q1 2017


Impacts on operating resultQ2 2017 vs. Q1 2017 and H1 2017 vs. H1 2016

71

89

0102030405060708090

H1 2016 H1 2017

Comparable operating result, EUR millionH1 2017 vs. H1 2016

+ Growing delivery volumes in paperboard

and positive development in market pulp

- Geographic sales mix of Husum’s FBB and

product mix of Husum’s white linerboards,

maintenance at Finnish mills

+ Positive development at Finnish paperboard

mills and in market pulp, positive impact from

FX rates including hedges

- Increased latex price

EBIT-%

8.2

EBIT-%

9.7EBIT-%

10.2

EBIT-%

9.2

WTKL = white-top kraftliner

FBB = folding boxboard

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

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 Q1/17 Q2/17

Comparable ROCE, %


Return on capital employed, %

Target >12%

Q2/17:

10.3%

Cash flows clearly positiveWorking capital remained nearly unchanged despite the strong growth in Q2

3356

93

66

-22 -22

6755 26

379 8 45 8

-76

-50

49 177

25

250

214

256 247

193

115

8978

126

185188

119 118

70

-15

-73

-69

-60

2398

-100

-50

0

50

100

150

200

250

300

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17

Cash flow from operations, quarterly Free cash flow, quarterly

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

EU

R m

illio

n


Stable balance sheet

333 464 541 488 464 458 495

1.2

2.0 2.1 2.12.0

1.92.0

0.0

1.0

2.0

3.0

0

200

400

600

2015 2016 6/16 9/16 12/16 3/17 6/17

Interest-bearing net debt, EUR million

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

Interest-bearing net debt /

comparable EBITDA

333 464 541 488 464 458 495

32%

44%

54%

49%

44% 44% 45%

0

0.1

0.2

0.3

0.4

0.5

0.6

0

200

400

600

2015 2016 6/16 9/16 12/16 3/17 6/17

Interest-bearing net debt, EUR million

Net gearing, %

Net gearing, %


Financial target: <2.5x

Debt structure and liquidity30 June 2017

223

149111

23

134

Bonds

Loans fromfinancial institutions

Pension loans

Finance leases andother loans

Other short-termloans

141

100

102

Cash and cashequivalents

Revolving creditfacility

Unraised pensionloans

Interest-bearing debt,

total EUR 640 million

Available liquidity,

total EUR 343 million

Average maturity of long-term loans on 30 June 2017 was 2.0 years. 28 Jefferies conference 2017

Long-term debt and financial costs

Net financial costs and average interest rateMaturity schedule in long-term IB debt

82

42

258

174

1 2

100 102

0

75

150

225

300

2017 2018 2019 2020 2021 >2022

Long-term interest bearing liabilities, EUR million

Committed undrawn credit facilities, EUR million


56 39 32 31 12

4.6

4.2

3.8

3.3 3.3

3.0

3.5

4.0

4.5

5.0

0

15

30

45

60

2013 2014 2015 2016 H1/2017

Net financial costs, EUR million

Average interest rate at the end of period, %

Metsä Board‘s credit ratings:

Standard & Poor‘s: Rating BB+, Outlook: Positive

Moody‘s: Rating Ba2, Outlook: Stable

Impact of FX rate changes including hedges

– Q2 2017 vs. Q1 2017: EUR -1.5 million

– H1 2017 vs. H1 2016: EUR 11 million

FX exposure and sensitivities

58 %35 %

5 %2 %USD

SEK

GBP

Othercurrencies

Annual transaction exposure

EUR 1.1 billionFX sensitivities excluding hedges

10% strengthening of foreign currency vs. EUR will have an impact on

Metsä Board’s EBIT of

Currency Next 12 months

USD, $ EUR +70 million

SEK EUR -40 million

GBP, £ EUR +7 million

30 Jefferies conference 2017Hedging policy: 100% of balance sheet position and 50% of annual net FX flows


Near-term outlook

• Price levels in FBB are expected to be stable, several

linerboard producers have announced price increases.

Pulp market expected to remain in balance.

• Metsä Board’s Q3 paperboard delivery volumes are

expected to stay flat compared to Q2

• Focus on improving the geographic sales mix in

Husum’s folding boxboard and increase the share of North

American sales, in particular

• Start up phase of Metsä Fibre’s new bioproduct mill is

expected to have only a minor negative impact on Metsä

Board’s Q3 result

Result guidance:

Metsä Board's comparable operating result for the Q3/2017 is

expected to improve slightly compared to the Q2/2017.

Operating environment

Global trends driving growth in packaging

• Growing consumption

• Stronger demand for sustainable

packaging

• Greater significance of resource

efficiency drives circular economy and

life-cycle thinking

• Increasing regulation brings additional

obligations

• Social responsibility throughout the

value chain


Metsä Board has a strong position in Europe

Largest Folding Boxboard Producers in EuropeTotal capacity: 3.7M tonnes

Largest White Fresh Fibre Linerboard Producers in EuropeTotal capacity: 2.2M tonnes

Sources: Company information, Pöyry Management Consulting Oy Q2/2017

17%

7%

9%

11%

20%

36%

0 300 600 900 1200 1500

Others

International Paper

Mayr-Melnhof

Kotkamills Oy

Stora Enso

Metsä Board

15%

7%

10%

14%

22%

31%

0 200 400 600 800

Others

SCA

BillerudKorsnäs

Mondi

Smurfit Kappa

Metsä Board


35

GROWTH

IN THE

AMERICAS

IN THE COMING

YEARS

MAINTAIN

THE STRONG

MARKET

POSITION IN

EUROPE

FOCUS ON

PREMIUM

PAPERBOARD

SEGMENTS IN

THE ASIA-PACIFIC

REGION


17%


75%


8 %

EUROPE

• A leading market position with

strong, long-lasting customer

relationships – especially with

brand owners

• Safety is increasing significance

in food packaging

• Paperboard is a strong

alternative to plastics and

aluminium

• Growing e-commerce

increasing demand for high-end

white-top kraftliners


Metsä Board's growth drivers in Europe

36

GROWTH

IN THE

AMERICAS

IN THE COMING

YEARS

MAINTAIN

THE STRONG

MARKET

POSITION IN

EUROPE

FOCUS ON

PREMIUM

PAPERBOARD

SEGMENTS IN

THE ASIA-PACIFIC

REGION


17%


75 %


8 %

AMERICAS

• Local production not able to meet rising trend of

lightweighting

• Non-integrated converters looking for alternative

board suppliers

• Paperboard a strong alternative to plastics –

especially in food service applications

• Growing e-commerce increasing demand for

high-end white-top kraftliners


Metsä Board's growth drivers in Americas

37

Global cartonboard* market is 36 Mt/a of which

folding boxboard market is about 9 Mt/a

Source: Metsä Board estimates

* Excluding liquid packaging board, food service board,

liner and uncoated recycled board.

APAC20 Mt/a

EMEA8 Mt/a

North

America6 Mt/a

Lat.Am.2 Mt/a

Folding boxboard

Other fresh fibre grades (e.g. SBS, CUK)

Recycled grades

Avg. growth rate for

folding boxboard is

3–4%/a


• High investment costs

• Limited availability of high yield pulp (e.g. BCTMP)

• Global brand owners and corrugated box manufacturers not

willing to change paperboard suppliers easily in the high-quality

segments– High speed packaging lines very quality sensitive

– Requirements for unified brand look and feel globally

– Sustainability and product safety aspects

• Skilled people and organizations a crucial success factor


High threshold for new producers

to enter high-quality paperboard

segment

500

600

700

800

900

1000

1100

1200

2009 2010 2011 2012 2013 2014 2015 2016 2017

Folding boxboard White-top kraftliner


Market price development in folding boxboard

and white-top kraftliner in Europe

EUR/ tn

Sources: RISI, Inc. & FOEX Indexes Ltd

Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR

Hardwood, EUR

Hardwood, USD

USDEUR

Pulp price development (PIX)

40

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

'10 '11 '12 '13 '14 '15 '16 '17

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050


Sustainability

Pure paperboard

helps to store the

packaged product

safely.

The circular economy of a durable and safe package

Durable paperboard protects

the packaged product

effectively.

Our paperboards are recyclable

and biodegradable, or they can

be used for energy production.

We follow good

manufacturing principles

(GMP).

All of our products meet the

requirements of relevant

international legislation.

Fresh fibre is a pure

and safe, renewable

raw material.We only use carefully selected and

safe raw materials in our products.


LOGISTICS

ENSURE THE

SUSTAINAINABILITY OF

MAIN LOGISTIC FLOWS

PERFORMANCE 2016−2017

100%

SAFETY AT WORK

LOST-TIME ACCIDENTS

FREQUENCY ANNUALLY

PERFORMANCE 2016 -18.9%

-10%

ENERGY

ENERGY EFFICIENCY

IMPROVEMENT

2009−2020

PERFORMANCE 2016 7.8%

12% -17%

RESOURCE EFFICIENCY

PROCESS WATER USE PER

PRODUCT TONNE

2010−2020

PERFORMANCE 2016 -14%

Metsä Board’s sustainability targets

>80%

WOOD

THE SHARE OF

CERTIFIED WOOD

PERFORMANCE 2016 81%

-30%

CLIMATE

FOSSIL CO2 EMISSIONS

PER PRODUCT TONNE

2009−2020

PERFORMANCE 2016 -45%

<3%

WELL-BEING

SICKNESS ABSENTEEISM

PERFORMANCE 2016 4.1%

BIOENERGY SHARE OF TOTAL

PURCHASED ENERGY 51%


CDP Water A List

– For the second year in a row Metsä Board was globally the

only forest company chosen to the A List

CDP Climate A List

– Only 9% of the companies were chosen on the list

CDP Forest programme

– Leadership status

CDP Supply chain programme

– Metsä Board participates together with its customers

– L’Oréal nominated Metsä Board to its best performer as

packaging material supplier in 2015

44

Metsä Board scored again high

in CDP in 2016


Appendix

Metsä Board’s folding boxboards are

produced from BCTMP or mechanical pulp,

which is used in the middle layer (3) to

make the board bulky and light.

The two outer fibre layers (2 and 4) are

made of chemical pulp, which maximizes

the strength of the board.

Coating layers (1) can be one or several

and on top or both sides.

46

Metsä Board’s folding boxboard has a

three-layer structure


Logistics costs16%

Wood26%

Chemicals, pigments and fillers

14%

Energy12%

Other variables

3%

Personnel 14%

Other fixed15%


Metsä Board’s cost structure in 2016

Total costs in 2016 were

EUR 1.6 billion,

of which 30% were fixed costs

and 70% variable costs


Metsä Board’s production units

Äänekoski

Simpele

Joutseno

Tako

Kyro

KaskinenHusum

KemiIntegrated mills

• Husum, Sweden

400,000 t/a folding boxboard

270,000 t/a white linerboard

730,000 t/a chemical pulp

• Kemi

410,000 t/a white linerboard

620,000 t/a chemical pulp by Metsä Fibre

• Äänekoski



• Joutseno

320,000 t/a BCTMP


Non-integrated mills

• Kyro (Kyröskoski)


• Simpele


• Tako (Tampere)


• Kaskinen

340,000 t/a BCTMP

Taking into account Metsä Group‘s

pulp production, Metsä Board‘s pulp

balance is 400,000 t/a long

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

08 2017

METSÄ BOARD INVESTED EUR 24.9 MILLION

IN EQUITY → COMPANY’S PULP BALANCE

WILL GROW BY 200,000 TONNES/A.

CAPACITY, tonnes/a

1.3 million

Metsä Board’s associated company Metsä Fibre

builds a Bioproduct Mill in Äänekoski Finland


METSÄ TISSUE

Tissue and cookingpapers

Sales:

EUR 1.0 billionPersonnel:

2,700

Metsäliitto Cooperative

holding 100%

METSÄ WOOD

Wood Products

Sales:


1,520


holding 100%

METSÄ FOREST

Wood Supply and ForestServices

Sales:


860


holding 100%


METSÄ BOARD

Paperboard

Sales:


2,500


holding 42%, 61% of votes

METSÄ FIBRE

Pulp and SawnTimber

Sales:


1,230


holding 50.2%,

Metsä Board 24.9%,

Itochu Corporation 24.9%

METSÄ GROUP | Sales EUR 4.7 billion | Personnel 9,300

METSÄLIITTO COOPERATIVE | Group’s parent company | Owned by 104,000 Finnish forest owners

51

Metsä Board Corporate Management Team

Mika JoukioCEO

Chairman of CMT since 2014

Share ownership 261,884

Ari KivirantaSVP, Development

Member of CMT since 2014

Share ownership: 16,236

Jussi NoponenCFO



Sari PajariSVP, Marketing and

Sales



Susanna TainioSVP, HR


Share ownership 20,505


Share ownerships are B-shares

Harri Pihlajaniemi was

appointed SVP, Production,

and a member of the Corporate

Management Team on 6 June

2017. He will start by 6

September 2017 at the latest.

Katri Sundström

VP, Investor Relations

Tel +358 400 976 333

[email protected]

www.metsaboard.com

52

Contact information


mailto:[email protected]

Metsä Board and other... · 2017-08-21 · 7 Jefferies conference 2017 Metsä Board operates in...

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