Metsä Board Half year financial report 1 – 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
Half year financial report 1-6/20163
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
Half year financial report 1-6/20164
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
Half year financial report 1-6/20165
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
Half year financial report 1-6/20166
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
Half year financial report 1-6/20167
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)
Half year financial report 1-6/20168
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
Half year financial report 1-6/201610
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
Half year financial report 1-6/201611
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
Half year financial report 1-6/201612
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
Half year financial report 1-6/201614
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.
Half year financial report 1-6/201615
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
Half year financial report 1-6/201616
Summary
Half year financial report 1-6/201618
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
Half year financial report 1-6/201619
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
Half year financial report 1-6/201620
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
Half year financial report 1-6/201621
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
Half year financial report 1-6/201622
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, %
Half year financial report 1-6/201623
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€)
Half year financial report 1-6/201624
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
Half year financial report 1-6/201625
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
Half year financial report 1-6/201626
Half year financial report 1-6/2016
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
*)