Metsä Board Corporation...Metsä Board Corporation January–March 2018 Interim report Presentation...

Metsä Board CorporationJanuary–March 2018 Interim reportPresentation material

3 May 2018

• Rising market prices of paperboards fully compensated unfavourable FX development

• Production and delivery volumes of paperboard and market pulp increased

• No major maintenance shutdowns during the quarter• Production efficiency of the mills was good• Strong pulp market supported profitability• S&P upgraded Metsä Board to investment grade

1-3/2018 Interim report2

Q1 2018: The best quarter in yearsQ1 2018 vs. Q4 2017

Increased sales and strong profitability development

SalesEUR million

436 423 440 422 445 474 479 451 4920

100

200

300

400

500

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

35 36 34 33 45 44 50 54 69

8,0 % 8,5 %7,7 % 7,8 %

10,2 %9,2 %

10,5 %12,0 %

14,0 %

0%

4%

8%

12%

16%

0

20

40

60

80

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18


Comparable operating resultEUR million and % of sales

FY 2016:EUR 1,720 million

EU

R m

illio

n

EU

R m

illio

n

FY 2017:EUR 1,849 million

FY 2016:EUR 138 million

FY 2017:EUR 194 million

Total paperboard deliveries up by 40,000 tonnes compared to the previous quarter

227 250 266 245 265 304 299 276 297

142148 148 143

163173 170

152171

0

100

200

300

400

500

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

White kraftliner Folding boxboard

1,00

0 to

nnes

4 1-3/2018 Interim report

FY 2016:1,568 tonnes

FY 2017:1,802 tonnes

Annual global demand growth

for folding boxboard and

white kraftliners is estimated to

be 3–4%

Source: Metsä Board’s own research

+15%

• Impacts of FX rate changes including hedges:– Q1 2018 vs. Q4 2017: EUR 12 million negative

– Q1 2018 vs. Q1 2017: EUR 15 million negative

• FX impacts will be small in Q2/2018 compared to Q1, further headwind in Q3• Hedging policy: 50% of annual transaction exposure and 100% of balance sheet position

Weakened USD caused headwind in Q1

56 %35 %

7 % 2 %USD

SEK

GBP

Othercurrencies

12 month transaction exposureEUR 1.09 billion

FX 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 +65 million

SEK EUR -39 million

GBP, £ EUR +7 million


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 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18

Comparable ROCE-%, Quarterly1-3/2018 Interim report6

Q1/2018 ROCE nearly 16%

Target >12%

66

-22 -22

67 5526 37

68

106

308

-76 -72

4917 7

25

5979

20

-100

-50

0

50

100

150

200

250

-100

-50

0

50

100

150

200

250

Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18

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

EUR

milli

on

7 1-3/2018 Interim reportFree cash flow = Cash flow from operations - investments

Cash flow from operations EUR 241 million(Rolling 12 months)

412 541 488 464 458 495 437 358 335

1,5

2,1 2,1 2,0 1,9 2,01,7

1,2 1,1

0,0

0,5

1,0

1,5

2,0

2,5

3,0

0

100

200

300

400

500

600

3/2016 6/2016 9/2016 12/2016 3/2017 6/2017 9/2017 12/2017 3/2018

Net debt, EUR million Net debt to comparable EBITDA1-3/2018 Interim report8

Strong financial position, leverage at 1.1x

Net debt / EBITDA target level <2.5

EU

R m

illio

n

• Metsä Board is a forerunner in lightweight paperboards

• In January, Metsä Board launched a biobased, fully recyclable and biodegradable eco-barrier paperboard

• The company continues to develop other barrier solutions, and is investigating the utilisation of biobased coatings

Lightweighting and barrier solutions are the key focus areas for R&D



Near-term outlook

• Good demand in fresh fibre paperboards, market prices are expected to be stable or rising

• Total paperboard delivery volumes are expected to increase slightly in Q2 2018 compared to Q1

• Several maintenance shutdowns at Finnish mills in Q2

• Negative impact from weakened USD against EUR will continue

• FY 2018 production costs estimated to rise

Metsä Board’s comparable operating result in the second quarter of 2018 is expected to weaken compared to the first quarter of 2018.


Result guidance for Q2 2018

• Strong performance continues after the excellent first quarter

• Weakened USD will have a negative result impact at least until end of Q3

• Still potential to improve profitability of Husum’s FBB

• Good market situation in fresh fibre paperboard is expected to continue


Summary

Appendices


Key financials

Q1/18 Q4/17ChangeQ1/18

vs. Q4/17Q1/17

ChangeQ1/18

vs Q1/17

FY 2017

Sales EUR, m 492 451 9 % 445 11 % 1,849

EBITDA* EUR, m 94 78 21 % 69 37 % 289

Operating result* EUR, m 69 54 27 % 45 53 % 194

% of sales % 14.0 12.0 10.2 10.5

Result before taxes* EUR, m 61 47 30 % 40 53 % 157

Earnings per share EUR 0.15 0.12 25 % 0.10 50 % 0.42

ROCE* % 15.8 12.4 10.6 11.2

Capex EUR, m 11 27 -61 % 19 -45 % 65

Cash flow from operations EUR, m 30 106 -72 % 26 18 % 236

IB Net debt, at end of period EUR, m 335 358 -7 % 458 -27 % 358*comparable

Paperboard delivery split in Q1 2018

Folding boxboard deliveries in Q1/18 (Q1/17) 1,000 tonnes

EMEA205 (186)

Americas60 (52)

APAC 31(27)

EMEA122 (111)

Americas48 (47)


White kraftliner deliveries in Q1/18 (Q1/17)1,000 tonnes

70%20%

10%

72%28%

Total FBB deliveries grew by 12%

Total WKL deliveries grew by 5%

Estimated capex for 2018 is EUR 70 million

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016 2017 2018EMaintenance capex Growth capex Depreciation

EUR million


Main growth in capex in 2015−2016: Husum investment programme, extrusion coating line and equity investment in Metsä Fibre’s bioproduct mill

0

50

100

150

200

250

2018 2019 2020 2021 2022–26 2027Bonds Loans from financial institutions Pension loans Other loans


Debt maturity31 March 2018

Interest-bearing debt maturity profile 31 March 2018

EUR

milli

on

• Total interest-bearing debt on 31 March was EUR 617 million (31 Dec 2017: EUR 577 million)

• After the review period, Metsä Board repaid EUR 100 million of its existing term loan maturing in 2020

Rating agency Rating andoutlook

Last update

Standard & Poor‘s

BBB-stable

02/2018 Upgrade from BB+

Moody‘s Ba1 positive

04/2018Upgrade fromstable outlook

Metsä Board’s credit ratings

Debt structure and liquidity31 March 2018

308

164

95

9 41 Bonds

Loans fromfinancial institutions

Pension loans

Finance leases andother loans

Other short-termloans

279

100

134

Cash and cashequivalentsRevolving creditfacilityUnraised pensionloans

Interest-bearing debt, total EUR 617 million

Available liquidity, total EUR 513 million

Average maturity of long-term loans on 31 March 2018 was 5.1 years. 18 1-3/2018 Interim report

* Of which EUR 248 million due 2027 and EUR 60 million due 2019

*

After the review periodMetsä Board increasedthe size of its RCF by

EUR 50 million


Net financial costs January–March 2018

39 32 31 36 8

4,2

3,8

3,3 3,33,0

2,0

2,5

3,0

3,5

4,0

4,5

5,0

0

10

20

30

40

50

2014 2015 2016 2017 Q1/2018

Net financial costs, EUR millionAverage interest rate at the end of period, %

EUR million % • Net financial costs (including foreign exchange rate differences) in 1–3/2018 were EUR 8 million (1–3/17: EUR 5 million)

• At the end of March, the average interest rate on loans was 3.0%

Market cap and foreign owners31 March 2018

Ownership distribution31 March 2018

Market cap and ownership distributionMetsä Board shares (METSB, METSA) are listed on Nasdaq Helsinki

0

4

8

12

16

20

24

0

500

1 000

1 500

2 000

2 500

3 000

2013 2014 2015 2016 2017 Q1/2018

Market cap, EUR million

Share of foreign owners, %

41 %

20 %

18 %

21 % MetsäliittoCooperative

Domestic institutionalinvestors

Domestic privateinvestors

Foreign owners

EUR million

* Metsäliitto Cooperative has 61% of voting rights

*

20

%

1-3/2018 Interim report

500

600

700

800

900

1000

1100

1200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Folding boxboard White-top kraftliner


Market price development in EuropeFolding boxboard and white kraftliner

EUR/t

Sources: RISI, Inc. & FOEX Indexes Ltd

350400450500550600650700750800850900950

1000105011001150

'10 '11 '12 '13 '14 '15 '16 '17 '183504004505005506006507007508008509009501000105011001150

Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR

Hardwood, EUR

Hardwood, USD

USDEUR

Pulp price development (PIX)


• Metsä Board’s commitment to sustainable business is widely recognized by CDP and EcoVadis, among others.

• In Q1/2018 CDP included MetsäBoard on both its Supplier Climate A and Supplier Water A lists. MetsäBoard is the only Finnish company on these lists and globally the only forest industry company on the Supplier Climate A list.

Sustainability is a significant part of Metsä Board’s core operations


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