Metsä Board CorporationFY 2019 ResultsPresentation material12 February 2020
• Strong cash flow• Paperboard delivery volumes slightly lower
due to seasonality, prices remained stable• In Europe, market pulp prices continued to
decline• Profitability supported by less maintenance
and lower production costs• First investments made in the renewal of
the Husum pulp mill
• Board of Directors proposes a distributionof EUR 0.24 per share for 2019
2019 Results2
Q4 2019 in summary COMPARABLE
OPERATING RESULT
39.1EUR million
OPERATING CASH FLOW
89.6EUR million
PAPERBOARD DELIVERIES
440,000tonnes
TOTAL INVESTMENTS
56.8EUR million
3
• New ambitious sustainability targets for 2030• Several external recognitions, e.g. EcoVadis Gold rating,
position on the CDP Climate A list
• Improved folding boxboard portfolio which saves resources and reduces carbon footprint
• New ecobarrier paperboard provides an alternative to plastic
2019 Results4
Sustainability highlights from 2019Developing low-carbon solutions according to the principles of the circular economy
More information and all targets at www.metsaboard.com/sustainability
ENERGY CONSUMPTION
+0.7%PER PRODUCED TONNE,
COMPARED TO 2018
PROCESS WATER CONSUMPTION
-11%PER PRODUCED TONNE,
COMPARED TO 2018
SHARE OF FOSSIL-FREE
ENERGY
83%
Actuals in 2019:
Total paperboard delivery volumes slightly down year-on-year
265 304 299 276 297 328 297 293 302 299 305 300
163173 170
152171
161149 134 138 146 161 140
0
100
200
300
400
500
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
White kraftliner Folding boxboard
1,00
0 to
nnes
5 2019 Results
1,00
0 to
nnes
FY 2018: 1,830,000 tonnes
FY 2019: 1,791,000 tonnes
-2%
+3%
Paperboard sales development by market area in 2019
2019 Results6
EMEA860,000 (844k)
Americas242,000 (252k)
APAC105,000 (119k)
FBB deliveries in 2019 (2018)total 1,207,000 tonnes (1,215k)
71%
EMEA385,000 (438k)Americas
190,000 (173k)
APAC9,000 (4k)
WKL deliveries in 2019 (2018)total 584,000 tonnes (615k)
EMEA• Stable demand in FBB with rising price levels• Soft market situation in WKL in H1, demand picked
up during the summer. Slightly improved price levels year-on-year
AMERICAS• Slightly lower delivery volumes in FBB with clearly
improved price levels. Stable market situation in WKL with increased delivery volumes
APAC• Lower FBB delivery volumes
20%
9%
66%
33%
FBB = Folding boxboardWKL = White kraftliner
69 62
59 41
6443
60
39
0
60
120
180
240
300
2018 2019
Higher paperboard prices supported 2019 sales, profitability burdened mainly by lower market pulp prices
SalesEUR million
492 487
519 477
475 489
458 478
0
400
800
1200
1600
2000
2018 2019
7
Comparable operating resultEUR million and % of sales
EUR
milli
on
EUR
milli
on
2019 Results
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
FY 2018: EUR 252 million
13.0%
FY 2019: EUR 184 million
9.5%
FY 2018:EUR 1,944 million
FY 2019: EUR 1,932 million
Our long-term financial targets aim for profitability and a strong balance sheet
Comparable ROCE:Target at least 12%
8.111.2
14.410.4
2016 2017 2018 2019
2.0
1.2 1.0 1.1
2016 2017 2018 2019
Net debt/comparable EBITDA:Maximum level 2.5x
> 12%
< 2.5x
88 2019 Results
76
50 51 59
2016 2017 2018 2019
Dividend policy: Payout ratio at least 50% of net result
> 50%
Market pulp price decline decelerating but coronavirus causes uncertainty
9
Pulp price (PIX) development in Europe and China• In 2019 European NBSK (USD) decreased by
16%, while Chinese prices dropped by 28%*. Some stabilisation especially for Chinese prices towards the end of the year
• Strong Chinese consumption throughout 2019, driven by the resurgence of paper and paperboard production. Demand trend remains expanding. In Europe, the trend remains rather weak
• Global stock levels for both NBSK and BHK have declined from the peak levels in the summer 2019
2019 Results
Long-fibre pulp, Europe Long-fibre pulp, China (net)
Source: Fastmarkets Foex
USD/tonne USD/tonne
0
200
400
600
800
1 000
1 200
1 400
0
200
400
600
800
1 000
1 200
1 400
2013
2014
2015
2016
2017
2018
2019
*) calculated from the difference between the average yearly prices
Main investments in growth and development 2014–2020E:
2020E Husum pulp mill renewal
2019 Husum pulp mill renewal, new sheeting line in Äänekoski
2018 New baling line in Kaskinen BCTMP mill: 30,000 new BCTMP capacity
2017 New extrusion coating line in Husum: 100,000 t/a PE coating capacity
2015–16 New folding boxboard production line in Husum: 400,000 t/a of FBB and linerboard production line conversion: 250,000 t/a of WKL
10
Total capex in 2019 roughly EUR 100 millionHusum pulp mill renewal will increase capex in the coming years
0
50
100
150
200
250
2014 2015 2016 2017 2018 2019 2020E
Capex in growth and developmentMaintenance capexDepreciation
Capital expenditure and depreciation
EUR
milli
on
2019 Results
NOTE! Estimated investments in 2020 are provisional and dependent on the environmental permit process related to the Husum pulp mill renewal
68
106
30 3654
30 36 3144
90
5979
20 2343
-3
2913
26 37
-50
0
50
100
150
200
250
-50
0
50
100
150
200
250
Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19
Cash flow from operations, quarterly Free cash flow, quarterlyCash flow from operations, rolling 12 months Free cash flow, rolling 12 months
EUR
milli
on
11 Free cash flow = cash flow from operations − total investments
Strong operative cash flow in 2019Q4 cash flow supported by release in working capital
EUR
milli
on
2019 Results
Renewal of Husum pulp mill in Sweden
Husum pulp mill renewal
2019 2020 2021 2022
Company expects to make the final investment decision
New recovery boiler and turbine expected to be in operation
Pre-engineering
phase launched
Company applies
amendment to environmental
permit
2019 Results13
The renewal consists of two phasesØ Create a solid foundation to increase paperboard capacity in the Husum integrate in the future
Ø Secure cost efficient pulp and energy production
Ø Enable the company to reach its ambitious target of fossil-free mills by 2030
Second phase: New fibre line. To be implemented during the 2020s after the first phase is fully completed
First phase: New recovery boiler and turbine
First investments made
Investment value• Investment value of first phase is EUR 320 million, divided over 2019–
2022 – In 2019 investments were EUR 21 million
Estimated impacts of the first phase • Self-sufficiency in electricity increases from 40% to over 80%*
• Reduced amount of purchased oil• Lower maintenance capex and costs
– Reduced duration and extended intervals between planned shutdowns → Increased pulp and paperboard production
• Annual cash flow improvement EUR 35 million, of which EUR 30 millionEBITDA improvement and EUR 5 million lower capex
• Financing costs to increase EUR 2 million per year
2019 Results14
Husum pulp mill renewal in figures
*) Annual increase in electricity production about 330 GWh, resulting in cost savings at 2019 electricity prices of approximately EUR 12 million
15
Near-term outlookJanuary–March 2020
• Strikes in Finnish mills will have a negative impact on operating result of approximately EUR 20 million, affecting mainly Q1 2020
• Metsä Board’s paperboard delivery volumes will be roughly at the same level as in Q4 2019
• Paperboard prices expected to be stable, pulp prices are not expected to decline
• No major planned maintenance shutdowns during Q1 2020
• Stable production costs, prolonged mild winter might increase wood costs
2019 Results
Metsä Board’s comparable operating result for the first quarter of 2020 is expected to weaken compared to the fourth quarter of 2019 due to strikes at mills in Finland.
2019 Results16
Result guidance for January–March 2020
• Q4 2019 development met the expectations
• First investments made to Husum pulp mill renewal
• Strikes in the Finnish mills will have a negative impact on profitability in H1
• Market outlook:– Stable market situation for
paperboard– Pulp prices are not expected to
decline, but coronavirus is causing uncertainty
2019 Results17
Summary
Appendix
2019 Results19
Key financials
Q4/19 Q4/18ChangeQ4/19
vs. Q4/18FY 2019 FY 2018
Change2019
vs. 2018
Sales EUR, m 478 458 4% 1,932 1,944 -1%
EBITDA* EUR, m 59 81 -27% 279 344 -19%
Operating result* EUR, m 39 60 -35% 184 252 -27%
% of sales* % 8.2 13.1 9.5 13.0
Metsä Fibre’s share of operating result* EUR, m 1 32 -97% 43 124 -64%
Earnings per share EUR 0.05 0.14 -64% 0.41 0.57 -28%
ROCE* % 8.9 13.7 10.4 14.4
Capex (own assets) EUR, m 54 34 59% 95 70 33%
Cash flow from operations EUR, m 90 30 195% 201 151 33%
IB Net debt, at end of period EUR, m 308 335 -8% 308 335 -8%
*comparable
2019 Results20
Comparable operating resultQ4 2019 vs. Q3 2019 and FY 2019 vs. FY 2018
Positive:+ less annual maintenance+ lower production costs+ sale of emission rights
Negative:- weakened market pulp prices- Metsä Fibre’s result share- lower paperboard delivery volumes
Positive:+ higher prices in FBB and WKL + FX
Negative:- weakened market pulp prices- Metsä Fibre’s result share - higher wood and raw material costs in paperboard and pulp
Comparable operating resultQ4 2019: EUR 39.1 million (Q3 2019: EUR 42.5 million)
Comparable operating resultFY 2019: EUR 184.4 million (FY 2018: EUR 251.9 million)
358 335 388 344 335 297 380 352 308
1,2 1,1 1,21,0 1,0 0,9
1,2 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
12/2017 3/2018 6/2018 9/2018 12/2018 3/2019 6/2019 9/2019 12/2019
Net debt, EUR million Net debt to comparable EBITDA (last 12 months)
21
Strong balance sheet at the year endNet debt at EUR 308 million, leverage 1.1x
Net debt / EBITDA target level: <2.5
EUR
milli
on
2019 Results
Impact including hedges, actual– Q4 2019 vs Q3 2019: EUR +1 million
– Q4 2019 vs Q4 2018: EUR +10 million
– FY 2019 vs FY 2018: EUR +48 million
Expected impacts including hedges– Q1 2020 vs Q4 2019: slightly positive
– Q1 2020 vs Q1 2019: positive
Impacts from FX changes
USD57%SEK
34%
GBP7%
Other currencies
2%
Annual transaction exposuretotal EUR 1.1 billion
FX sensitivities excluding hedges
10% strengthening of foreign currency vs. EUR would have an impact on Metsä Board’s EBIT of
Currency Next 12 months
USD, $ EUR +63 million
SEK, kr EUR -39 million
GBP, £ EUR +9 million
22 2019 Results
Cost inflation accelerated in 2018 and costs remained at a high level in 2019
Q4 2019 vs. Q3 2019Declined wood costs, lower pulp costs in the paperboard business
FY 2019 vs. FY 2018Prices of raw materials remained high in 2019. Wood costs were at a higher level than the year before, but declined slightly towards the end of the year
Wood28%
Logistics16%
Chemicals16%
Energy14%
Personnel12%
Other fixed14%
2019 Results23
Metsä Board’s cost split in 2019
Metsä Board’s total costs in 2019: EUR 1.70 billion
(2018: EUR 1.69 billion)
4%
6%
8%
10%
12%
14%
16%
Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19
Comparable return on capital employed, %
Quarterly Rolling 12m Target
24
In 2019 comparable ROCE at 10.4%
Target level > 12%
2019 Results
R12m10.4%
Q4/19:8.9%
0
50
100
150
200
250
2020 2021-2024 2025 2027
Bonds Loans from financial institutions Pension loans Finance lease liabilities2019 Results25
Debt and its maturity
Long-term interest-bearing debt maturity profile as per 31 December 2019
EUR
milli
on
• On 30 September, Metsä Board agreed on a new bank financing facility consisting of a five-year term loan of EUR 150 million and a five-year RCF of EUR 200 million to replace the drawn loan of EUR 50 million and undrawn RCF of EUR 150 million
• Interest-bearing debt on 31 December was EUR 445 million (31 Dec 2018: EUR 447 million)
Rating agency Rating and outlook
Last update
S&P Global BBB-stable
02/2018 Upgrade from BB+
Moody‘s Investor Services
Baa3 stable
01/2019Upgrade from Ba1
Metsä Board’s both credit ratings are investment grade
2019 Results26
Net financial costs in 2019 were EUR 15.4 million
32 31 36 22 15
3.8
3.3 3.3 3.3
2.5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
0
10
20
30
40
2015 2016 2017 2018 2019
Net financial costs, EUR mill ionAverage interest rate at the end of period, %
EUR million %
• Net financial costs, including foreign exchange differences, in 2019 were EUR 15.4 million (FY 2018: 22.3)
• Average interest rate on loans at the end of review period was 2.5% and the average maturity of long-term loans was 6.4 years
• No major differences in annual interest payments after the new financial arrangements on 30 September 2019
• Annual financial costs expected to increase by EUR 2 million with the Husum pulp mill renewal
Debt structure and liquidity on 31 December 2019
249149
24
23Bonds
Loans fromfinancialinstitutions
Pension loans
Finance leasesand other loans
24
134
200
190
Cash and cashequivalents
RCF, unraised
Pension loans,unraised
Interest-bearing debt EUR 445 million
Available liquidityEUR 524 million
Average maturity of long-term loans on 31 December 2019 was 6.4 years. 27 2019 Results
Market cap and foreign owners31 December 2019
Ownership distribution31 December 2019
Market cap and ownership distributionMetsä Board’s A- and B-shares are listed on Nasdaq Helsinki
0
5
10
15
20
25
0
500
1 000
1 500
2 000
2 500
3 000
12/2015 12/2016 12/2017 12/2018 12/2019
Market cap, EUR millionShare of foreign owners, %
Metsäliitto Cooperative
46%
Domestic institutional investors
19%
Domestic private
investors20%
Foreign owners
15%
EUR million
28
%
2019 Results
External recognition and commitments
In ISS ESG Corporate Rating (previously oekom research Corporate Rating) Metsä Board has a Prime status.
Metsä Board scored the Goldlevel in EcoVadis’ CSR ranking in 2019, and is included in the top 1% of companies assessed in the corrugated paper and paperboard industry.
Metsä Board has been on the CDP Climate AList since 2016. In addition, Metsä Board scored A- in the CDP Water and Forest Programmesand in the Supplier Engagement Rating in 2019.
Metsä Board as a part of Metsä Group is committed to the UN Global Compact corporate responsibility initiative and its principles in the areas of human rights, labour, environment and anti-corruption. Metsä Board also supports the UN’s Sustainable Development Goals, the SDGs.
Metsä Board’s GHG emissions’ reduction targets are approved by the Science Based Targets initiative.
In 2019, Metsä Board received a rating of AAA (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment.
In December 2019 , MetsäBoard received an overall ESG Risk Rating score of 17.6 and is considered by Sustainalytics to be at low risk of experiencing material financial impacts from ESG factors.
Link to MSCI Terms and Conditions
Metsä Board’s ESG performance was rated “Advanced” in Vigeo Eiris ESG assessment in July 2019.
500
600
700
800
900
1000
1100
1200
500
600
700
800
900
1000
1100
1200
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Folding boxboard
White-top kraftliner
30
Price development of folding boxboard and white kraftliner in Europe
EUR/ tonne
Sources: Fastmarkets RISI & Fastmarkets FOEX
EUR/ tonne
350400450500550600650700750800850900950100010501100115012001250
350400450500550600650700750800850900950
100010501100115012001250
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Source: Fast Markets Foex
USD or EUR USD or EUR
31
Price development of pulp in Europe (PIX)Long-fibre (SW) and short-fibre (HW) pulp
Long-fibre, USD
Long-fibre, EUR
Short-fibre, EUR
Short-fibre, USD
Price development of roadside pulpwood in Finland and Sweden
Pulpwood roadside prices in Finland, EUR/m3 Pulpwood roadside prices in Sweden*, SEK/m3
Sources: Luke (Natural Resources Institute Finland) and Skogsstyrelsen (The Swedish Forest Agency)Investor presentation1–12/2019
2022242628303234363840
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Spruce Birch Pine150170190210230250270290310330350370390
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Spruce Birch Pine
FX rates development: EUR/USD and EUR/SEKEUR/USD
1–12/2019 33
EUR/SEK
1,08
1,1
1,12
1,14
1,16
1,18
1,2
1,22
1,24
1,26
12.2
9.20
171.
29.2
018
2.28
.201
83.
31.2
018
4.30
.201
85.
31.2
018
6.30
.201
87.
31.2
018
8.31
.201
89.
30.2
018
10.3
1.20
1811
.30.
2018
12.3
1.20
181.
31.2
019
2.28
.201
93.
31.2
019
4.30
.201
95.
31.2
019
6.30
.201
97.
31.2
019
8.31
.201
99.
30.2
019
10.3
1.20
1911
.30.
2019
12.3
1.20
19
9,6
9,8
10
10,2
10,4
10,6
10,8
11
12.2
9.20
171.
29.2
018
2.28
.201
83.
31.2
018
4.30
.201
85.
31.2
018
6.30
.201
87.
31.2
018
8.31
.201
89.
30.2
018
10.3
1.20
1811
.30.
2018
12.3
1.20
181.
31.2
019
2.28
.201
93.
31.2
019
4.30
.201
95.
31.2
019
6.30
.201
97.
31.2
019
8.31
.201
99.
30.2
019
10.3
1.20
1911
.30.
2019
12.3
1.20
19