Metsä BoardInvestor presentation FY 2017
8 February 2018
Investor presentation 1–12/20172
ContentsInvestment highlights 3
Strategy and financial targets 13
Operating environment and market position 21
Growth in the paperboard business 30
Husum investment programme and update 37
Result for Q4 2017 and FY 2017 43
Production, capacities and sourcing 59
Product development focus areas 64
Sustainability 70
Shares and owners 76
Appendix 80
Contact information 89
Investment highlights
• A pure-play paperboard company focused on premium fresh fibre paperboards
• Strong market position: – #1 in folding boxboard and white kraftliners in Europe
– #1 in coated white kraftliners globally
• Global megatrends – population growth, urbanization and sustainability – are driving the demand for ecological packacing
• A growth company with good profitability• Self-sufficiency in pulp
Investor presentation1–12/20174
Metsä Board – Investment highlightsFolding
boxboard 53%White
kraftliners27%
Market pulp 18%
Others 3%
Sales split in 2017
EMEA 72 %
Americas19 %
APAC9 %
Sales split by region in 2017
Global sales to over 100countries from 8 productionunits in Finland and Sweden
Metsä Board’s paperboard offers solutions for widevariety 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
Investor presentation1–12/20175
Roughly 50% of Metsä Board’s folding boxboard sales in Europe is negotiated directlywith brand owners
6
Metsä Board has a broad customer base
BRAND OWNERS
FOLDING BOXBOARD WHITE LINERBOARDS
MERCHANTS
CORRUGATED BOX MANUFACTURERS
CONVERTERS
Investor presentation1–12/2017
Lightweighting• Metsä Board’s folding boxboard can be up to 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 manycompetitive advantages
7
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.
8
Three-layer structure makes the board light whilemaintaining the stiffness
Investor presentation1–12/2017
Profitability development 2013–2017 ROCE reaching the targeted level of 12%
Comparable ROCE-%
Investor presentation1–12/20179
Comparable EBIT-%
6,4
9,1
11,3
8,1
11,2
0
2
4
6
8
10
12
2013 2014 2015 2016 2017
% 5,2
6,8
9,08,0
10,5
0
2
4
6
8
10
12
2013 2014 2015 2016 2017%
Target over 12%
Year 2016 profitability was burdened by the ramp-up of Husum’s folding boxboard machine
Investor presentation1–12/201710
Strong improvement in productivity over time
1 000
1 100
1 200
1 300
1 400
1 500
1 600
1 700
1 800
1 900
2 000
1 000
1 300
1 600
1 900
2 200
2 500
2 800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E
Productivity (capacity) Personnel average
Production capacity (tonnes) / employee at current millsPersonnel at current mills
Production capacity tn /employee
• Investments in 2017 were EUR 65 million (2016: EUR 162 million)
• Estimated capex in 2018 is roughly EUR 70 million
Clearly lower capex in 2017
0
30
60
90
120
150
180
2010 2011 2012 2013 2014 2015 2016 2017 2018E
Maintenance capex Growth capex Depreciation
EUR million
11 Investor presentation1–12/2017
Main growth in capex in 2015−2016: Husum investment programme, extrusion coating line and equity investment in Metsä Fibre’s bioproduct mill
• 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
Investor presentation1–12/201712
High threshold for new producers to enter high-quality paperboard segment
Strategy and financialtargets
Values
• Responsible profitability• Reliability• Cooperation• Renewal
Strategic cornerstones
• Focus• Growth• Profitability
Metsä Board’s vision is to be the preferred supplier of premium paperboards creating value for customers globally
Investor presentation1–12/201714
Focus on premium fresh fibre paperboards for consumer and retail packaging
This means to us:• We focus on serving customers whose quality
expectations require our high quality, light and strong packaging materials
• Our paperboards are produced from fresh fibres• Our products are used for packages at the store and
from the store to the consumer
Investor presentation1–12/201715
Strategic cornerstones: Focus
Profitability is based on superior cost efficiency and healthy sales prices driven by high-quality pulps and unique technical know-how
This means to us:• Our superior cost efficiency will be achieved by further
developing productivity and efficiency of our mills, operations and people
• We will continue to drive down purchasing costs in all areas
• Our self-sufficiency in high-quality pulps together with unique paperboard making expertise helps us to improve our market position further and maintain healthy price levels
Investor presentation1–12/201716
Strategic cornerstones: Profitability
Grow profitably together with brand owner, converter and merchant customers globally in businesses that benefit from our safe and sustainable paperboards
This means to us:• We grow in end-uses where our product is best suited to
protecting our customers’ products and promoting their brands and businesses
• Our customer base is global, including brand owner, private label, converter and merchant customers
• By selecting businesses that benefit from our paperboards we can generate value for our customers and grow profitably with them
Investor presentation1–12/201717
Strategic cornerstones: Growth
Financial targets and actuals
Comparable ROCE, %
6,4
9,1
11,3
8,1
11,2
2013 2014 2015 2016 2017
2,9
1,8
1,2
2,0
1,2
2013 2014 2015 2016 2017
Net debt / Comparable EBITDA, %
7%
10%
13% 12%15%
2013 2014 2015 2016 2017
Annual growth in total paperboard deliveries, %
Target is to exceed relevant market growth*
Dividend policy: Metsä Board aims to distribute at least 50% of its result for the financial period in annual dividends to its shareholders
Target: >12%
Target: <2.5
* Global fresh fibre paperboard demand growth 3-4%/a
Investor presentation1–12/20171818
• Grow the paperboard businesses profitably globally
• Ensure successful sales of new capacity
• Secure good price levels
• Keep best in class product quality and improve supply chain
• Develop new products for existing and new end uses
• Continue productivity improvements and cost savings
Investor presentation1–12/201719
Main priorities and actions to achieve financial targets
• Metsä Board’s dividend payout target is at least 50 per cent of the result for the financial period
• Dividend proposal for 2017:– EUR 0.21 per share– Totalling EUR 75 million– Corresponds to 50 per cent of EPS 0,00
0,10
0,20
0,30
0,40
0,50
2013 2014 2015 2016 2017
EPS and DPS, EUR
Earnings per share Dividend per share
Investor presentation1–12/201720
Dividend and EPS
* The Board's proposal to 2018 Annual General Meeting
*
Operating environment andmarket position
Global trends driving growth in sustainably packaging
• Urbanization
• Growing consumption
• Stronger demand for ecological packaging
• Greater significance of resource efficiency
• Increasing regulation
• Social responsibility throughout the value chain
Investor presentation1–12/201722
The global paperboard packaging market is about USD 300 billion
The total packaging market is USD 850 billion
Investor presentation1–12/201723
Average annual growth rate of paperboard packaging
Paperboard packaging
Other wood fibre based packaging
Non-fibre based packaging
USD 300 bn
USD bn
Source: Smithers Pira
0
50
100
150
200
250
300
350
400
2012 2013 2014 2015 2016 2017 2022F
+ 3% per year
2017-2022
24
Annual global demand for cartonboard* is 38 million tonnes of which folding boxboard is about 10 million tonnes
Source: Metsä Board estimates
*Excluding liquid packaging board, cup & plate stock, liner and uncoated recycled board.
APAC20 Mt/a
EMEA9 Mt/a
NorthAmerica
7 Mt/a
Lat.Am.2 Mt/a
Folding boxboard
Other fresh fibre grades (e.g. SBS, CUK)
Recycled grades
Avg. demand growth rate for folding boxboard
is 3–4% per year
Investor presentation1–12/2017
25
Annual global demand for food service board* is 3.5 million tonnes
* Base board (e.g. SBB or FBB) only, excl. other laminate materials such as aluminium and PE.
Cups
Plates
Cartons
APAC1.0 Mt/a
EMEA0.9 Mt/a
Americas1.6 Mt/a
Avg. demand growth rate for food service board is
3–5% per year
Source: Metsä Board estimatesInvestor presentation1–12/2017
26Source: Metsä Board estimates
Investor presentation1–12/2017
Americas3 Mt/a
Annual global demand for white linerboard is 11 million tonnesDemand for white kraftliners is 4 million tonnes and for white coated kraftliners 1 million tonne
Global demand for containerboards is 160 Mt/a, of which
• White linerboards 7%• Brown kraftliner 17%
• Brown testliner 37%
• Fluting 39%
Americas3 Mt/a
EMEA5 Mt /a
APAC3 Mt/a
White uncoated kraftliner
White coated kraftliner
White recycled liner
Avg. demand growth rate for white kraftliner is
3–4% per year
Metsä Board has a strong position in EuropeAs per 31 December 2017
Largest Folding Boxboard Producers in EuropeTotal capacity: 3.8M tonnes
Largest White Fresh Fibre Linerboard Producers in EuropeTotal capacity: 2.2M tonnes
Sources: Company information, Pöyry Management Consulting Oy Q1/2018
18%
7%
9%
10%
21%
35%
0 300 600 900 1200 1500
Others
International Paper
Mayr-Melnhof
Kotkamills Oy
Stora Enso
Metsä Board
10%
8%
11%
14%
23%
33%
0 200 400 600 800
Others
SCA
BillerudKorsnäs
Mondi
Smurfit Kappa
Metsä Board
27Investor presentation1–12/2017
Investor presentation1–12/201728
Market price development in folding boxboard and white-top kraftliner in Europe
EUR/ tn
Sources: RISI, Inc. & FOEX Indexes Ltd
500
600
700
800
900
1000
1100
1200
2009 2010 2011 2012 2013 2014 2015 2016 2017
Folding Boxboard White-top kraftliner
350400
450500550
600650700
750800
850900950
10001050
'10 '11 '12 '13 '14 '15 '16 '17350400
450500550
600650700
750800
850900950
10001050
Source: Foex Indexes Ltd
Softwood, USD
Softwood, EUR
Hardwood, EUR
Hardwood, USD
USDEUR
Pulp price development (PIX)
29 Investor presentation1–12/2017
Metsä Board’s growth in the paperboard business
Investor presentation1–12/201731
Metsä Board operates in growing paperboard marketAnnual global demand growth for folding boxboard and white kraftliners is estimated to be 3–4%
5-YEAR GROWTH FORECAST EMEA Americas APAC
Folding boxboard (FBB)
Food service board (FSB)
Coated white kraftliner
Uncoated white kraftliner
Other fresh fibre paperboards (e.g. SBS, CUK)
Recycled paperboards (e.g. WLC)
+2%/a or more
+1 to +2%/a
-1 to +1%/a
-1 to -2%/a
-2%/a or more
Source: RISI, CEPI, Pöyry and trade statistics among others Metsä Board’s focus area
Metsä Board’s growth clearly exceeds averagemarket growth
32
0
500
1 000
1 500
2 000
2013 2014 2015 2016 2017 2018 target
Fresh fibre linerboard Folding boxboard
Metsä Board’s annual paperboard deliveries 1,000 tonnes
Investor presentation1–12/2017
Investor presentation1–12/201733
Most important growth area is Americas In 2017, total deliveries to Americas grew by 23% year-on-year
0
50
100
150
200
250
300
2011 2012 2013 2014 2015 2016 2017 2018 target
Folding boxboard Fresh fibre linerboard
300
200
1,00
0 to
nnes
Actual and targeted deliveries to Americas
34
Metsä Board's regional goalsAmericas, EMEA and APAC
GROWTH CONTINUESIN THE AMERICAS
MAINTAINTHE STRONG MARKET POSITION IN EUROPE
FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION
AMERICASSHARE OF SALES IN 2017
19%
EMEASHARE OF SALES IN 2017
72%
APACSHARE OF SALES IN 2017
9%
Investor presentation1–12/2017
35
GROWTH CONTINUES IN THE AMERICAS
MAINTAINTHE STRONG MARKET POSITION IN EUROPE
FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION
AMERICASSHARE OF SALES IN 2017
19%
EMEASHARE OF SALES IN 2017
72%
APACSHARE OF SALES IN 2017
9 %
Investor presentation1–12/2017
Metsä Board's growth drivers in EuropeEUROPE
• Metsä Board’s strengths are based on long-standing customer accounts and a broad customer base
• Steady growth is sought through a diverse selection of products and services focused on customer needs
• Stricter safety requirements support demand for fresh fibre paperboards
36
GROWTH CONTINUESIN THE AMERICAS
MAINTAINTHE STRONG MARKET POSITION IN EUROPE
FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION
AMERICASSHARE OF SALES IN 2017
19%
EMEASHARE OF SALES IN 2016
75 %
APACSHARE OF SALES IN 2016
8 %
AMERICAS• Growth is driven by the limited local availability
of premium lightweight folding boxboard and by rapid growth in the demand for food service packaging made from fresh fibre paperboard
• The growth of discount store chains and online commerce increases demand for premium white kraftliner
Investor presentation1–12/2017
Metsä Board's growth drivers in Americas
Husum investmentprogramme and update
Investor presentation1–12/201738
• 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
• EUR 38 million investment, capacity of 100,000 t/a• Targeted at food packaging and food service applications• PE-coated (polyethylene) paperboard is an alternative to
plastics and the mainstream barrier solution today • PE fulfills important barrier requirements:
– Good water and moisture barrier
– Grease barrier (short time e.g. for food service)
– Good heat sealing properties
• Husum PE coating line utilises latest technology and benefits from a fully integrated production site
• Supports growth in a new customer segment
Investment in PE coating
Investor presentation1–12/201739
Raw materialLogistics
Raw materialExtrusion
Raw materialPaperboard
Raw materialPulp
40
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:
Investor presentation1–12/2017
• Capacity utilisation rate in 2017 was 71%– Target is to have capacity in full use by the end of
2018 • Improved sales mix towards end of the year 2017• Average sales price still below target• Potential to improve operating profit in Husum by
EUR 100 million from 2016 to 2019
Investor presentation1–12/201741
Update on Husum’s folding boxboard
42
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 tonnesof pulp
productionlost in 2016
Restructuring:
Efficiency improvementprogramme
FBB capacityutilisation rate
>95% withnormal sales
price*
Investor presentation1–12/2017
* The sales price improvement in Euros is currently being delayed by the weakened US dollar.
Result for FY 2017 and Q4 2017
Investor presentation1–12/201744
Q4 2017 in summary(vs. Q3 2017)
• Paperboard delivery volumes were lower,mainly due to seasonality
• Increased average prices in folding boxboard and white kraftliners
• Strong pulp market supported profitability• Negative impact from maintenance
shutdown in Husum• Strong cash flow from operations
Dividend proposal for 2017 is EUR 0.21
January–December 2017: Increasing sales and improved operating result
SalesEUR million
436 423 440 422 445 474 479 4510
100
200
300
400
500
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17
+7%
35 36 34 33 45 44 50 54
8,0 % 8,5 %7,7 % 7,8 %
10,2 %9,2 %
10,5 %
12,0 %
0%
2%
4%
6%
8%
10%
12%
14%
-5
5
15
25
35
45
55
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17
+41%
Investor presentation1–12/201745
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
Strong growth continued in Metsä Board’s paperboard deliveries
204 213 224 224 227 250 266 245 265 304 299 276
130 141 137 131 142148 148
143163
173 170152
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 Q3 2017 Q4 2017
White kraftliner Folding boxboard
1,00
0 to
nnes
46 Investor presentation1–12/2017
FY 2015:1,404 tonnes
FY 2016:1,568 tonnes
FY 2017:1,802 tonnes+12% +15%
Annual global demand growth for folding boxboard
and white kraftlinersis estimated to be
3–4%
Source: RISI, CEPI, Pöyry and trade statistics among others
Europe is the main market area for Metsä BoardAmericas is growing: FBB deliveries up by 54% in 2017 vs. 2016
Folding boxboard (FBB) deliveries in 2017 (2016)1,000 tonnes
EMEA796 (725)
Americas232 (151)
APAC116 (110)
EMEA457 (382)
Americas187 (191)
APAC14 (7)
Investor presentation1–12/201747
White kraftliner (WKL) deliveries in 2017 (2016)1,000 tonnes
70%20%
10%
69%29%
2%
Total FBB deliveries grew by 16% in 2017 vs. 2016
Total WKL deliveries grew by 13% in 2017 vs. 2016
• Impacts of FX rate changes including hedges:– Q4 2017 vs. Q3 2017: EUR 4 million negative
– FY 2017 vs. FY 2016: EUR 13 million positive
• Hedging policy: 50% of annual transaction exposure and 100% of balance sheet position
Weakening USD causing headwind
57 %35 %
6 %2 %USD
SEK
GBP
Othercurrencies
Annual transaction exposureEUR 1.14 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
48 Investor presentation1–12/2017
0%
2%
4%
6%
8%
10%
12%
14%
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 Q3/17 Q4/17
Comparable Return on Capital Employed, %, QuarterlyInvestor presentation1–12/201749
ROCE is approaching its targeted levelFY 2017 Comparable ROCE was 11.2%
Target >12%Q4/17:12.4%
Cash flows clearly positive
3356
9366
-22 -22
67 55 2637
68
106
9 8 45 8
-76 -72
49 17 7 2559
79
247
78
236
70
-82
170
-100
-50
0
50
100
150
200
250
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/14
Cash flow from operations, quarterly Free cash flow, quarterlyCash flow from operations, rolling 12 months Free cash flow, rolling 12 months
EUR
milli
on
50 Investor presentation1–12/2017 Free cash flow = Cash flow from operations - investments
333 412 541 488 464 458 495 437 358
1,21,5
2,1 2,1 2 1,9 21,7
1,2
0,0
0,5
1,0
1,5
2,0
2,5
3,0
0
100
200
300
400
500
600
12/2015 3/2016 6/2016 9/2016 12/2016 3/2017 6/2017 9/2017 12/2017
Net debt, EUR million Net debt to comparable EBITDAInvestor presentation1–12/201751
Strong financial positionNet debt reduced nearly EUR 80 million in the Q4, leverage at 1.2x
Net debt/EBITDA target level <2.5
EU
R m
illio
n
Debt structure and liquidity31 December 2017
308163
95
92
Bonds
Loans fromfinancial institutions
Pension loans
Finance leases andother loans
Other short-termloans
215
100
134
Cash and cashequivalentsRevolving creditfacilityUnraised pensionloans
Interest-bearing debt, total EUR 577 million
Available liquidity, total EUR 449 million
Average maturity of long-term loans on 31 December 2017 was 5.4 years. 52 Investor presentation
1–12/2017
* Of which EUR 248 million due 2027 and EUR 60 million due 2019
*
0
50
100
150
200
250
2018 2019 2020 2021 2022–26 2027
Bonds Loans from financial institutions Pension loans Other loansInvestor presentation1–12/201753
Debt maturity lengthened due to new 10-year bond
Interest-bearing debt maturity profile 31 December 2017
EUR
milli
on
• Total interest-bearing debt on 31 December was EUR 577 million (31 Dec 2016: EUR 688 million)
• In 2017, Metsä Board issued new 10-year EUR 250 million bond with 2.75% annual coupon
Rating agency Rating andoutlook
Last update
Standard & Poor‘s
BB+ (positive) 02/2017
Moody‘s Ba1 (stable) 08/2017Upgrade from Ba2
Metsä Board‘s credit ratings
Investor presentation1–12/201754
Increased financial costs due to the financing arrangements in September
56 39 32 31 36
4,6
4,2
3,8
3,3 3,3
3,0
3,5
4,0
4,5
5,0
0
10
20
30
40
50
60
2013 2014 2015 2016 2017
Net financial costs, EUR millionAverage interest rate at the end of period, %
EUR million %• Net financials in 1–12/2017
were EUR -36 million (1–12/16: EUR -31 million)
• Full-year financial expenses include EUR 11 million of costs related to the early repurchase of the bond maturing in 2019
Investor presentation1–12/201755
Debt programmes 31 December 2017Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity
EUR 250 million bond issued 2017 250 250 2.8 2027
EUR 225 million bond issued 2014 60 60 4.4 2019
Syndicated credit facility 2014 250 150 2.9 2020
EUR 14 million bilateral loans 14 14 1.4 2018–2022
EUR 8 million finance leases 8 8 4.0 2018–2024
EUR 229 million pension loans 229 95 4.5 2018–2020
Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity
Revolving credit facility 2014 100 0 - 2020
Pension loan facilities 229 95 4.5 -
Short-term funding programmes
Metsä Group internal short-term limit 150 0 - 0–12 months
Metsä Group Treasury funding programmes
EUR 150 million domestic CP programme 150 0 - 0–12 months
Metsä Board’s significant debt securities issued and outstanding at 31 December 2017
*) The average interest rate take into account outstanding interest rate swaps and amortised arrangement fees.The average interest rate of all Metsä Board interest bearing net liabilities incl. interest rate derivatives per 31 December 2017 is 3.3%.
Metsä Board’s principal long-term liquidity reserves at 31 December 2017
Investor presentation1–12/201756
Near-term outlook
• Total paperboard delivery volumes are expected to increase in Q1 2018 compared to Q4 2017
• Market prices in fresh fibre paperboards are expected to rise
• Negative impact from weakened USD• Production costs estimated to rise in 2018• Target is to continue to improve the average
price of FBB from Husum and increase sales to Americas
Metsä Board’s comparable operating result in the first quarter of 2018 is expected to improve slightly compared to the fourth quarter of 2017.
Investor presentation1–12/201757
Result guidance for January–March 2018
• First year as a pure paperboard company: strong growth and improved profitability in 2017
• Dividend proposal EUR 0.21• Good overall market situation for 2018…• …but negative impact from weakened
USD
Investor presentation1–12/201758
Summary
Production, capacities and sourcing
Investor presentation1–12/201760
Metsä Board’s production units
Äänekoski
Simpele
Joutseno
Tako
Kyro
KaskinenHusum
KemiIntegrated mills• Husum, Sweden
400,000 t/a folding boxboard270,000 t/a white linerboard730,000 t/a chemical pulp
• Kemi420,000 t/a white linerboard620,000 t/a chemical pulp by Metsä Fibre
• Äänekoski240,000 t/a folding boxboard1,300,000 t/a chemical pulp by Metsä Fibre
• Joutseno330,000 t/a BCTMP690,000 t/a chemical pulp by Metsä Fibre
Non-integrated mills• Kyro (Kyröskoski)
190,000 t/a folding boxboard
• Simpele290,000 t/a folding boxboard
• Tako (Tampere)210,000 t/a folding boxboard
• Kaskinen340,000 t/a BCTMP
Taking into account Metsä Group‘s pulpproduction, Metsä Board‘s pulp balancein 2018 is over 500,000 t/a long
Investor presentation1–12/201761
Paperboard capacity
Town Country Machines Folding boxboard
White freshfibre linerboard Total
Tampere (Tako) Finland 2 210 210
Kyröskoski (Kyro) Finland 1 190 190
Äänekoski Finland 1 240 240
Simpele Finland 1 290 290
Kemi Finland 1 420 420
Husum Sweden 2 400 270 670
Total 8 1,330 690 2,020
Investor presentation1–12/201762
Pulp capacityMetsä Board pulp mills Country Chemical pulp BCTMP Total
Husum Sweden 730 730
Joutseno Finland 330 330
Kaskinen Finland 340 340
Total 730 670 1,400
Metsä Fibre pulp mills Country Chemical pulp BCTMP Total
Äänekoski Finland 1,300 1,300
Kemi Finland 620 620
Rauma Finland 650 650
Joutseno Finland 690 690
Total 3,260 3,260
Own generation
22%
Through PVO shareholding
29%
Purchased energy
46%
Outsourced generation
3%
Wood-based52%
Nuclear power28%
Gas8%
Coal4%
Peat4%
Oil2% Wind +
solar0%
Hydro0%
Sweden 40%
Finland32%
Baltic countries17 %
Russia12%
Sourcing 2017Electricity sourcing
(total 2,440 GWh)
Investor presentation 1–12/201763
Primary energy used(total 12.0 TWh)
Wood sourcing by country (total 5.4 million cubic metres)
Product development focus areas
Key product development focus areas
Improved BCTMP
Microfibrillated cellulose (MFC)
Strength additives
Sustainable lightweighting
Dispersion barriers
Bio-based raw materials
Barrier boardPE extrusion coated products
Investor presentation1–12/201765
Lighter-weight paperboards: Better with Less
Metsä Boardlightweight paperboard
Average FBB –Folding boxboard
SBB –Solid bleached board
WLC –White lined chipboard
Investor presentation1–12/201766
67
Barrier boards types
NO
N-R
ENEW
AB
LE
BIODEGRADABLE
REN
EWA
BLE
NON-BIODEGRADABLE
Metsä Board’s baseboard is biobased, bio-degradable and compostable.
Biobased, biodegradable coating, i.e. starch, PLA etc.
Oil-based, biodegradable coating
Bioplastic coating, i.e. green PE
Latex based dispersion coatingPE extrusion coating
Investor presentation1–12/2017
Metsä Board barrier boards roadmap
Bio
base
dba
rrie
rN
onbi
obas
edba
rrie
r
Outsourced PE extrusion coating
Own PE extrusion coating
Biobased barrierBiobasedlight barrier
2016 2017Investor presentation1–12/201768
• Biobased, fully recyclable and biodegradable paperboard
• Developed especially for food service use with short food contact time and when light grease resistance is sufficient
• Metsä Board continues to develop other barrier solutions, and is investigating the utilization of dispersion and biobased coatings, and their commercial potential
Investor presentation1–12/201769
Metsä Board launched an innovative eco-barrier paperboard
Sustainability
• Metsä Board’s raw material, fresh fibres, is 100% traceable to sustainably managed forests
• Production of strong but lightweight paperboards requires less energy and water
• Metsä Board received several recognitions for sustainability in 2017:• CDP: A Lists in Climate and Water,
Leadership status in Forest programme• Gold rating from EcoVadis
Investor presentation1–12/201771
Sustainability is at the core of Metsä Board’s operations
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 goodmanufacturing 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.
72 Investor presentation1–12/2017
Rain waters the forest
Bark is utilised as a bio-energy source
Metsä Board’s boardproduction is mostly integrated in pulp production
Waste waters are always carefully cleanedbefore returned back to the waterways
Also lakes and seas are a source of recreation
Light weight boards are resource efficient both for us as well as for our customers
99% of water used in the productionprocess is returned back to the waterways
Metsä Board’s paperboards can be recycled, depending upon local recycling services
Forests are a source of recreation
Metsä Board uses water efficiently
Metsä Board has decreased its CO2 emissions by 45% since 2009 and the use of water by 14% since 2010
Metsä Board only uses surface waterin its production
LOGISTICSENSURE THE SUSTAINAINABILITY OF MAIN LOGISTIC FLOWS
PERFORMANCE 2016−2017 100% In the end of 2017, all 481 logistics partners included in the sustainability survey fulfilled MetsäGroup’s sustainability criteria.
SAFETY AT WORKLOST-TIME ACCIDENTS FREQUENCY ANNUALLY
PERFORMANCE 2017 -28.4%
-10%ENERGYENERGY EFFICIENCY IMPROVEMENT2009−2020
PERFORMANCE 2017 10.2%
12% -17%RESOURCE EFFICIENCYPROCESS WATER USE PERPRODUCT TONNE 2010−2020
PERFORMANCE 2017 -17%
Metsä Board’s sustainability targets
>80%
WOODTHE SHARE OFCERTIFIED WOOD
PERFORMANCE 2017 80%
-30%
CLIMATEFOSSIL CO2 EMISSIONS PER PRODUCT TONNE 2009−2020
PERFORMANCE 2017 -47%
<3%WELL-BEINGSICKNESS ABSENTEEISM
PERFORMANCE 2017 3.9%
BIOENERGY SHARE OF TOTAL PURCHASED ENERGY 52%
74
EU Commission– Announced plans to regulate printed food contact materials (FCMs)
on EU levelFood Contact Material legislation in Switzerland
– Part of Swiss Food law– Recycled paper cannot be used as FCM, if direct contact with food
products – Concentration limits of certain polyaromatic hydrocarbons
micrograms/kg food has been setDraft German mineral oil regulation
– 4th ordinance draft published in March 2017– The draft focuses on mineral oil migration from recycled fibre based
packaging materials to food
75
Increased regulation to ensureproduct safety
Investor presentation1–12/2017
Shares and owners
Market cap and foreign owners31 December 2017
Ownership distribution31 December 2017
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
2012 2013 2014 2015 2016 2017
Market cap, EUR million
Share of foreign owners, %
42 %
20 %
18 %
20 % MetsäliittoCooperative
Domestic institutionalinvestors
Domestic privateinvestors
Foreign owners
EUR million
* Metsäliitto Cooperative has 61% of voting rights
*
77
%
Investor presentation1–12/2017
Investor presentation1–12/201778
Ownership structure on 31 December 2017
42 %
20 %
18 %
11 %
4 % 2 % 3 %
MetsäliittoCooperative
Foreign owners*
Households
Public sectororganisations
Finance andinsurancecompaniesNon-profitorganisations
Other companies
61 %15 %
11 %
7 %
3 %
2 %1 %
MetsäliittoCooperative
Public sectororganisations
Households
Foreign owners*
Non-profitorganisations
Finance andinsurance companies
Other companies
Shares, % (total no. of shares 355,512,746)
Votes, % (total no. of votes 1,037,530,115)
* incl. nominee registered
Metsä Board has two series of shares: 35,886,682 A-shares and 319,626,064 B-shares.A-share entitles to 20 votes and B-share entitle to 1 vote at a General Meeting.
Increased shareholder value and steadily growingdividendEnterprise value, EUR million
0
500
1000
1500
2000
2500
3000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Net debt Market capitalization
Dividend and payout ratio %
0%
15%
30%
45%
60%
75%
90%
0,00
0,04
0,08
0,12
0,16
0,20
0,24
2012 2013 2014 2015 2016 2017
Dividend, EUR Dividend/EPS, %
79 Investor presentation1–12/2017
EUR mill. EUR
Appendix
METSÄ TISSUE
Tissue and cookingpapers
Sales:
EUR 1.0 billionPersonnel:
2,800Metsäliitto Cooperativeholding 100%
METSÄ WOOD
Wood Products
Sales:
EUR 0.5 billionPersonnel:
1,400Metsäliitto Cooperativeholding 100%
METSÄ FOREST
Wood Supply and ForestServices
Sales:
EUR 1.6 billionPersonnel:
850Metsäliitto Cooperativeholding 100%
Investor presentation1–12/201781
METSÄ BOARD
Paperboard
Sales:
EUR 1.8 billionPersonnel:
2,350Metsäliitto Cooperativeholding 41.5%, 61.4% of votes
METSÄ FIBRE
Pulp and SawnTimber
Sales:
EUR 1.9 billionPersonnel:
1,200Metsäliitto Cooperativeholding 50.1%, Itochu Corporation 25.0%Metsä Board 24.9%
METSÄ GROUP | Sales EUR 5.0 billion | Personnel 9,100
METSÄLIITTO COOPERATIVE | Group’s parent company | Owned by 104,000 Finnish forest owners
(consolidated)
Metsä Board is listedon the Nasdaq Helsinki
Investor presentation1–12/201782
Metsä Board’s credit rating
0
1
2
3
4
5
6
7
8
1.1.2011 1.1.2012 1.1.2013 1.1.2014 1.1.2015 1.1.2016 1.1.2017
Moody's Standard & Poors Investment Grade
CCC+ / Caa1
B- / B3
B / B2
B+ / B1
BB- / Ba3
BB / Ba2
BBB- / Baa3
BB+ / Ba1
CCC+ / Caa1
B- / B3
B / B2
B+ / B1
BB- / Ba3
BB / Ba2
BBB- / Baa3
BB+ / Ba1
Investor presentation1–12/201783
Metsä Board Corporate Management Team
Mika JoukioCEO
Chairman of CMT since 2014MG employee since 1990Share ownership: 261,884
Jussi NoponenCFO
Member of CMT since 2016MG employee since 2000Share ownership: 50,000
Sari PajariSVP, Marketing and Sales
Member of CMT since 2011MG employee since 2007Share ownership: 45,740
Ari KivirantaSVP, Development
Member of CMT since 2014MG employee since 1993Share ownership: 16,236
Harri PihlajaniemiSVP, Production
Member of CMT since 2017MG employee in 2001-2004 and since 2017Share ownership: no ownership
Susanna TainioSVP, HR
Member of CMT since 2015MG employee since 2011Share ownership: 20,505
Share ownerships are B-shares.MG = Metsä Group
- From 26 to 8 production units
- Paper capacity from 5 million tonnes to zero
- Paperboard capacity from 1.1 million tonnes to 2.0 million tonnes
- Major divestments incl. Graphic Papers and Map Merchants
- Paperboard (incl. market pulp) 100% of sales from 2017 onwards
- Major improvement in profitability and financial position
Today strong position and growing
- #1 producer of folding boxboard and white kraftliner in Europe
- #1 producer of coated white-top kraftliner globally
- Husum investment programme enabling significant growth steps
Investor presentation1–12/201784
Restructuring to a pure-play paperboardcompany from 2005 onwards
Investor presentation1–12/201785
4440 3236 2432 2605 2485 2108 2019 2008 2008 1720 1849
1,1 ‐1,1‐6,2
6,6
2,4
3,6
5,2
6,8
9,0
8,0
10,5
‐8,0
‐4,0
0,0
4,0
8,0
12,0
0
1000
2000
3000
4000
5000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sales, EUR million Comparable EBIT‐%
%
Sales and EBIT-% development
Investor presentation1–12/201786
M&A activity 1997−2015
100 000 B2 shares in
PVO
Acquisitions
Divestments
Biberist Paper Mill
UK Paper
Modo Paper
Zanders
ChemicalsBusiness
BotniaWood
CorrugatedPackaging
MD Papier Metsä Tissue
Albbruck SavonSellu
Forestia
KemiartLiners (53 %)
8% in Botnia
PSM
9% in Botnia
Cartonplants
Map
New Thames
MB Uruguay
Graphic Papers
Part of Reflex
Halleinmill
1997 20001998 1999 2001 2002 2003 2004 2005 2006 2007 20092008 2010 2011
Rest of Reflex
0.5% in PVO
2012
7.3 % in Metsä Fibre
2013 2014
Alizay mill Lielahti
real estate
2015
Gohrsmühle mill
Simpele Mill
Year Divestiture Enterprise Value, EUR million
2015 Gohrsmühle mill in Germany neg.
2014 Lielahti real-estate 32
2013 Alizay property and other estates 22
2012 7.3% stake in Metsä Fibre 138
2012 0.5% stake in PVO 64
2011 Hallein 34
2009 Metsä-Botnia’s Uruguayan operations 300*
2008 Graphic Papers 750
2008 100,000 shares in PVO 80
2008 New Thames mill 82**
2007 Map Merchant Group 382
2007 Folding carton plants 60
2007 Botnia (9%) 240
2005 Botnia (8%) 164
2005 Savon Sellu 20
2005 Forestia (95%) 163
2004 Metsä Tissue 570
2002 Papierfabrik Albbruck 235
2001 MD Papier 300
2001 Noviant (19%) 41
3,679
Investor presentation1–12/201787
Significant Divestments EUR 3.7 billion in assets divested since 2001
* Cash portion**Incl. pension liabilities
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
August 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 Fibre’s new Bioproduct Mill
88 Investor presentation1–12/2017
Katri SundströmVice President, Investor relations
Tel +358 400 976 [email protected]
89
Contact information
Investor presentation1–12/2017