Improving profitability, solid financial position and updated financial targets

Jussi Noponen CFO

Metsä BoardCapital Markets Day 2017

Disclaimer

This presentation includes forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “may,” “plan,” “estimate,” “will,” “should,” “could,” “aim,” “target,” “might,” or, in each case, their negative, or any similar expressions identify certain of these forward-looking statements. Others can be identified from the context in which the statements are made. By their nature, forward-looking statements are subject to assumptions, risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, actual results may differ, even materially, from those expressed or implied by these forward-looking statements. We urge presentation participants not to place undue reliance on such statements.

The information and views contained in this presentation are provided as at the date of this presentation and are subject to change without notice. Metsä Board does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Viewers should understand that this presentation does not constitute, and should not be construed as, an offer to buy or subscribe for Metsä Board’s securities anywhere in the world or an inducement to enter into any investment activity relating to the same. No part of this presentation should form the basis of, or be relied on in connection with, any contract or commitment or decision to invest in Metsä Board securities whatsoever. Potential investors are instructed to acquaint themselves with MetsäBoard’s annual accounts, interim reports and stock exchange releases as well as other information published by Metsä Board to form a comprehensive picture of the company and its securities.

Metsä Board publishes inside information according to Market Abuse Regulation (MAR) and rules of the Nasdaq Helsinki.

2017 CMD Noponen 2

• Husum profit potential

• Update on FX hedging and debt

• Cost structure and main drivers

• Updated financial targets

• Summary

3

Contents

2017 CMD Noponen

Folding boxboard production

• Costs per tonne produced are higher than in our other

mills due to lower capacity utilisation rate

• Production line fully utilised by the end of 2018

• Total deliveries to Americas will increase

• PE-coated paperboards generate sales in a new customer

segment

Linerboard production

• Volumes of coated linerboards will grow

4

High potential to improve

profitability in Husum

2017 CMD Noponen

5

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

2017 CMD Noponen

• Low ONWC at the end

of 2015 due to high

payables and low

inventories

• During Husum FBB

ramp-up, ONWC has

increased (3/2017:

EUR 319 million)

• Growing sales will

improve inventory

rotation towards year-

end. ONWC/Sales

expected to be 15–19%

6

Impact of Husum investment programme on

operating net working capital…

0

4

8

12

16

20

24

-300

-200

-100

0

100

200

300

400

500

600

700Operating net working capital M€

Accounts payable M€

Accounts receivable M€

Inventories M€

ONWC/sales, %

%M€

2017 CMD Noponen

3356

93

66

-22 -22

6755

269 8 45 8

-76

-50

49 17 7

250

214

256 247

193

115

8978

126

188

119 118

70

-15

-73

-69

-60

23

-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

Cash flow from operations, quarterly Free cash flow, quarterly

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

7

… and cash flowsStrong cash flow outlook resulting from improving profitability, stabilising working capital and lower investments

EU

R m

illio

n

2017 CMD Noponen

Update of FX hedgingand debt

9

FX exposure and sensitivities

58%34%

6% 2%

USD

SEK

GBP

Othercurrencies

FX exposure by currency,

Annual gross amount EUR 1.2bn

FX sensitivities before hedges

10% strengthening of foreign currency vs. EUR

will have an impact on Metsä Board’s operating result of

Currency Next 12 months

USD EUR +70 million

Swedish krona EUR -40 million

GBP EUR +7 million

2017 CMD Noponen

• New hedging policy gives more visibility to future cash flows

• The amount of hedging may deviate from the norm by 40% in either direction

• Hedges are primarily allocated to the following two quarters

• Currently hedging is at the new norm level

10

Updated hedging policy from Q1 2017 onwards

Old policy (before 2017) New policy (2017 onwards)

100% of balance sheet position* and

25% of estimated annual cash flows

100% of balance sheet position* and

50% of estimated annual cash flows

2017 CMD Noponen

* Net of A/R and A/P

105

35

257

174

1 2

100 102

0

50

100

150

200

250

300

4-12/2017 2018 2019 2020 2021 >2021

Maturity schedule in long-term IB debt

Long-term interest bearing liabilities Committed undrawn credit facilities

11

The aim is to reduce interest-bearing debt in 2017

by EUR 100 million

EUR

million

2017 CMD Noponen

223

149128

23

137

Bonds

Loans fromfinancial institutions

Pension loans

Finance leases andother loans

Other short-termloans

199

100

102

Cash and cashequivalents

Revolving creditfacility

Unraised pensionloans

12

Debt structure and liquidity31 March 2017

Interest-bearing debt,

total EUR 660 million

Available liquidity,

total EUR 401 million

Average maturity of long-term loans on 31 March 2017 was 2.2 years. Interest rate duration has been extended from 13 to 30 months during Q2/2017.

2017 CMD Noponen

Cost structureand main cost drivers

Logistics costs16%

Wood26%

Chemicals, pigments and fillers

14%

Energy12%

Other variables

3%

Personnel 14%

Other fixed15%

2017 CMD Noponen 14

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

Main drivers in logistics costs

• Volume growth

• Geographic sales mix

• Trade balances

• Fuel price

– 70% of maritime spend is under contracts with

fuel price clause. Fuel is ~20-30% of cost

– In road freight, ~25-30% of the cost is based

on fuel price clause

• Regulations

Maritime42%

Road34%

Rail8%

Ports & terminals

17%

Annual spend EUR 250 million

15

Logistics costs

2017 CMD Noponen

0%

10%

20%

30%

40%

50%

LandDomestic + Export

Ports & terminalsDomestic

Maritime Ports & terminalsDistribution

LandDistribution

Sh

are

of co

sts

16

Metsä Board logistics cost along the delivery chain

Land LandPorts & terminals Ports & terminalsMaritime

2017 CMD Noponen

The biggest cost component is wood

Wood sourcing by country in 2016

Metsä Board (total 4.6 million m3)

• Sweden 38%, Finland 31%, Baltic countries

18%, Russia 13%

Metsä Fibre pulp mills (total 12.6 million m3)

• Finland 89%, Russia 6%,

Baltic countries 5%

17

Pulpwood roadside prices in Finland

Source: Luke

20

22

24

26

28

30

32

34

36

38

40

201

0

201

1

201

2

201

3

201

4

2015

201

6

201

7

Spruce pulpwood roadside

Birch pulpwood roadside

Pine pulpwood roadside

2017 CMD Noponen

Primary energy used in 2016 (total 12 TWh)

• 51% wood based, 25% nuclear, 5% hydro, 9% gas

(natural gas and LPG) and 10% from other

sources

Electricity sourcing in 2016 (total consumption

2.4 TWh)

• Metsä Board will be nearly self-sufficient in

electricity in Finland when Metsä Fibre’s new

bioproduct mill and TVO’s OL3 reactor (expected

start-up 12/2018) are in full production

• In Sweden, Metsä Board will continue to purchase

approx. 450 GWh/a. Long hedging duration.

18

Over 80% of energy Metsä Board uses is CO2 -free

2017 CMD Noponen

Own generation;

21%

Nuclear through PVO shareholding;

32%

Outsourced generation;

3%

Through Metsä Fibre

shareholding; 6%

Purchased energy; 39%

Electricity sourcing

Financial targets andsummary

20

Updated financial targets

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 use2017 CMD Noponen

• High potential to improve profitability

in Husum

• Metsä Board is operating in stable

wood markets. Self-sufficiency in

electricity is increasing

• Updated financial targets support a

good balance between profitable

growth and dividends

2017 CMD Noponen 21

Summary