Q2 2016 Interim report presentation

Metsä BoardHalf year financial report1–6/2016

• Stable market situation

• Growing paperboard production volumes

and deliveries

• Profitability on the same level as in Q1

• Negative cash flow from operations

due to changes in working capital

• Strong balance sheet

– Extension of existing syndicated credit facility

Half year financial report 1-6/20162

Performance in Q2/2016

Sales decreased slightly due to lower market pulp

deliveries, EBIT remained stable

Sales, EUR million


EBIT excl. NRI’s, EUR million and % of sales

494 514 499 526 522 498 462 436 4230

100

200

300

400

500

600

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

28 35 37 43 47 55 35 35 360

10

20

30

40

50

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

________

H1/2015:

1,048 M€

________

H1/2016:

859 M€

________

H1/2015:

90 M€

________

H1/2016:

71 M€

→-3%

→+1%

Profitability development

ROCE-%, excl. non-recurring items


EBIT-%, excl. non-recurring items

6,4

9,1

11,3 11,6

8,3 8,5

0

2

4

6

8

10

12

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

5,2

6,8

9,0 9,0

8,08,5

0

2

4

6

8

10

12

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

Target over 12% from 2017

Paperboard segment

• Lower average price in FBB due to

Husum’s start-up grades

• Leakage in the recovery boiler in Husum

pulp mill

• More planned maintenance shutdowns

• Negative impact from FX rates

Other operations

• Positive difference from hedge accounting

and other items


Q2 2016 EBIT still impacted by ramp-up of new

folding boxboard machine

0

10

20

30

40

Q1/2016 Paperboard Non-coreoperations

Otheroperations

Q2/2016

EBIT bridge by segment Q1/16 vs. Q2/16excl. non-recurring items

EU

R m

illio

n

35 36

-6 -1

+8


Growing paperboard deliveriesCAGR% in 2011–2015 has been 9%

191 197 210 203 204 213 224 224 227250

112 110120

111 130141 137 131 142

148

0

60

120

180

240

300

360

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

Folding boxboard Fresh forest fibre linerboard

1,0

00

to

nn

es

Note! Figures exclude wallpaper deliveries

Paperboard deliveries

in Q2/2016 grew by:

+8% vs. Q1/2016

+12% vs. Q2/2015

• Paper production in Husum ended in July

– Remaining stocks will be sold during H2/2016

– BM2 in Husum produces now only fresh fibre

linerboard

• Metsä Board plans to close down the

wallpaper base machine PM3 at Kyro mill

– Statutory negotiations and adjustment measures will be

launched to improve the competitiveness of entire Kyro mill

– In 2015 sales were approximately €50 million and

EBIT -€5 million


Focus on folding boxboard

and fresh fibre linerboard

• Production output still low in Q2

– Bottlenecks in the finishing area

– Leakage in the recovery boiler

• Revised sales target 150 000 tonnes of new

folding boxboard in 2016

• Full capacity (400 000 tonnes) is expected

to be reached by end of 2016

• Efficiency programme is progressing as planned

• Original annual profit improvement of 50 M€ still

valid (fully from 2018 onwards)


Ramp-up phase of folding

boxboard machine in

Husum is progressing

Improved operational reliability of the FBB machine

in Husum

0

200

400

600

800

1000

1200

1400

1600

To

ns

Production (packed net) 7 days rolling average

February March April May June July

The leakage in the recovery

boiler of Husum’s pulp mill

Production stoppages due

to severe thunderstorms

• Total FX impact after hedges in Q2 vs. Q1 was slightly negative

• UK referendum concerning BREXIT did not have a major impact on profitability

• Hedging duration of the main foreign currency flows is currently approximately 5 months


FX exposure and sensitivities

62 %29 %

5 %4 % USD

SEK

GBP

Othercurrencies

FX exposure by currency

Annual gross amount EUR 1.1 billionAnnual FX sensitivities

to Group EBIT before hedges

10 % strengthening of foreign currency vs. EUR

will 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


Growing working capital and investments had still

negative impact on cash flows

92 5174 33 56 93 66

-22 -22

78 4656 9 8 45 8

-76

-50

114

157

198

250

214

256 247

193

115

57

110

155 188

119118

70

-15

-73-100

-50

0

50

100

150

200

250

300

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

Cash flow from operations, quarterly Free cash flow, quarterly

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

EUR million


Several items in Q2 weakened liquidity and

increased net debt

597 427 333 389 412 541

2.9

1.8

1.2

1.5

1,5

2,1

0

1

2

3

4

0

200

400

600

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

Net debt, EUR million

Net debt/EBITDA (rolling 12m)

Net debt/EBITDA

597 427 333 389 412 541

70%

51%

32%

39%42%

54%

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0

200

400

600

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

Net debt, EUR million

Net gearing-%

Net gearing, %

• In H1 2016 the gross investments

were EUR 103 million and depreciation

EUR 48 million

• Annual maintenance capex is EUR

40–60 million

• Main growth capexes in 2016:

– Husum investment programme:

EUR 40 million (total EUR 170 mil.)

– Extrusion line:

EUR 23 million (total EUR 38 mil.)

– Metsä Fibre’s bioproduct mill:

EUR 25 million*

Half year financial report 1-

6/201613

Capital expenditure

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016E

Capex Growth capex Depreciation

EUR million

*) investment in equity made in Q2/2016

• Healthy demand in fresh fibre paperboard is

expected to continue both in Europe and Americas

• In Europe, market prices in FBB and white-top

kraftliner are expected to rise slightly

– Metsä Board will increase the prices of linerboards and

FBB

• Metsä Board’s total delivery volumes in paperboard

are expected to grow compared to Q2/2016

• Q3/2016 profitability will be impacted by start-up

volumes from Husum, production challenges and

the delays in customer approvals due to the

production bottlenecks in Q2


Outlook for Q3/2016

Metsä Board’s operating result

excluding non-recurring items in

the third quarter of 2016 is

expected to remain roughly at the

same level as in the second

quarter of 2016.


Profit guidance

for Q3/2016

• Q2 result was as expected

• Production volumes of new folding boxboard from

Husum are growing but start-up volumes will still impact

profitability

• Total paperboard deliveries are growing

• Paper production in Husum ended in July

• Metsä Board plans to discontinue the wallpaper base

manufacturing at Kyro mill due to poor profitability

• Long-term financial targets are unchanged


Summary

Appendix


Key financials

Q2/16 Q1/16Change

Q2/16

vs. Q1/16H1/16 H1/15

Change

H1/16

vs. H1/15

Sales EUR million 423 436 ↓ 859 1,047 ↓

EBITDA, excl. NRIs EUR million 61 58 ↑ 119 143 ↓

% of sales % 14 13 ↑ 14 14 ↑

Operating result, excl. NRIs EUR million 36 35 ↑ 71 90 ↓

% of sales % 8 8 ↑ 8 9 ↓

Result before taxes, excl. NRIs EUR million 27 30 ↓ 57 72 ↓

Earnings per share EUR 0.07 0.07 0.14 0.19 ↓

ROCE, excl. NRIs % 9 8 ↑ 8 12 ↓

Gross investments EUR million 48 54 ↓ 103 72 ↑

Cash flow from operations EUR million -22 -22 ↓ -45 88 ↓

60 60 6551

42 36

15% 15% 16%13%

11%

9%

-2%

1%

4%

7%

10%

13%

16%

0

20

40

60

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

0

100

200

300

400

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

• Operating result excl. NRI in Q2 was

EUR 36 million (Q1/16: 42 M€)

– Low prices in FBB start-up grades,

bottlenecks and stoppages in Husum,

more planned maintenance shutdowns,

negative impact from FX

• Operating result excl. NRI in H1 was EUR

78 million (H1/15: 120 M€)

– Husum ramp-up, low prices in FBB start-up

grades, variations in pulp price, re-

allocated fixed costs from non-core

segment and increased depreciation


Paperboard segment

Operating result, EUR millionexcl. non-recurring items

Sales, EUR million

Operating result

Operating result,

EBIT-%

0

30

60

90

120

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

• Paper deliveries in Q2 decreased to

11 000 tonnes

• Production of uncoated paper reels

ended in July

• Remaining stocks will be sold during

H2/2016

• From Q3 onwards the reporting of

non-core operations segment will be

discontinued


Non-core operations segment

-3,2-3,4

-1,3

-8,4

0,2

-1

-2% -3%-2%

1%

-7%

-18%-16%-14%-12%-10%-8%-6%-4%-2%0%2%4%

-10

-8

-6

-4

-2

0

2

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

Sales, EUR million

Operating result, EUR millionexcl. non-recurring items

Operating result, M€

Operating result, M€

EBIT-%

-17%

• Other operations include costs which

are not allocated to units, e.g. head

office costs and hedge accounting

• In Q2/2016 hedge accounting and

other items had a positive impact on

segments’ result


Other operations

-9 -9 -8 -7

1

-15

-10

-5

0

5

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

Operating result, EUR million excl. non-recurring items


EBITDAexcl. non-recurring items

6252

62 6170 73

81

60 58 61

12%11%

12% 12%13%

14%

16%

13% 13%14%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

20

40

60

80

100

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

EBITDA, EUR million EBITDA, %


Steadily decreasing net financial costs

47 56 39 32 14

5,2

4,6

4,2

3,8

3,5

3,0

3,5

4,0

4,5

5,0

5,5

0

20

40

60

2012 2013 2014 2015 H1/16

Net financial costs, EUR million

Average interest rate at the end of period, %

EUR million %

• Net financials in Q2 were -9 M€

(Q1/16: EUR -5 M€).

• Net exchange gains and losses

amounted to -2 M€ (2M€)


Debt structure and liquidity30 June 2016

221

199

144

20

118

Bonds

Loans fromfinancialinstitutions

Pension loans

Finance leasesand other loans

Other short-termloans

157

100

65

Cash and cashequivalents

Revolving creditfacility

Unraised pensionloans

Debt structure,

total EUR 702 million

Available liquidity,

total EUR 322 million

Average maturity of long-term loans at 30 June in 2016 was 2.7 years.

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


Metsä Board 's credit rating

Moody’s

Standard & 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

Price development in folding boxboard and white-top

kraftliner in Europe 2009 – Q2 2016

Sources: Pöyry Management Consulting ja FOEX Indexes Ltd

EUR/ ton

Folding boxboard White-top kraftliner



Pulp price development (PIX)

2010 – Q2 2016

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

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

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR

Hardwood, EUR

Hardwood, USD

USDEUR

27

Market cap **) and foreign owners30 June 2016

1-6/201628

Ownership distribution30 June 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 6/2016

Market cap, EUR million

Share of foreign owners, %

42 %

23 %

18 %

17 %

MetsäliittoCooperative

Domesticinstitutionalinvestors

Domestic privateinvestors

Foreign owners

EUR million

*) Metsäliitto Cooperative has 62% of the voting rights

**) Metsä Board market cap segmentation is Large Cap and it’s

included in OMX H25 Index

*)

Documents

Q2 2016 Interim report presentation