Metsä Board CorporationHalf-Year Financial Report January–June 2019Presentation material
Metsä Board CorporationHalf-Year Financial Report January–June 2020Presentation material
H1 2020 Results2
Q2 2020 in summary COMPARABLE
OPERATING RESULT
60EUR million
OPERATING CASH FLOW
72EUR million
PAPERBOARD DELIVERIES
458,000tonnes
TOTAL INVESTMENTS
43EUR million
• Paperboard demand was at a good level, and prices remained fairly stable
• All-time high production volume in paperboards
• Strong cash flow generation continued• Slower than expected environmental
permit process for the new recovery boiler at Husum pulp mill
• Excellence Centre in Äänekoski was completed
• Impacts on paperboard demand– Increased demand in food, beverage and
pharmaceutical packaging– Decreased demand in graphic end uses and luxury
products packaging • Substantial precautionary measures in place ensuring
the safety of employees and business continuity• No impacts on production. Some of the planned
maintenance works in Q2 have been postponed to H2• Weakening of global economy hinders visibility and
may negatively impact Metsä Board’s profitabilityH1 2020 Results3
Covid-19 impacts on Metsä Board’s operations
4
EXCELLENCECENTREin Äänekoski, Finland
Boosting the developmentof new paperboard and
packaging solutions
Metsä Board’s new
Total paperboard delivery volumes increased
297 328 297 293 302 299 305 300 298 310
171161
149 134 138 146 161 140 152 148
0
100
200
300
400
500
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020
White kraftliner Folding boxboard
1,00
0 to
nnes
5 H1 2020 Results
1,00
0 to
nnes
FY 2018: 1,830,000 tonnes
FY 2019: 1,791,000 tonnes
Q2 2020 vs. Q2 2019: +3%H1 2020 vs. H1 2019: +3%
Sales development by market area in H1 2020
H1 2020 Results6
EMEA434k
(432k)
Americas132k
(120k)
APAC42k
(50k)
FBB deliveries in H1 2020 (H1 2019)total 608k tonnes (601k)
71%
EMEA195k
(183k)Americas 101k (97k)
APAC5k (4k)
WKL deliveries in H1 2020 (H1 2019)total 300k tonnes (284k)
EMEA• Strong demand for food and pharma packaging• Increased total delivery volumes• FBB prices stable, WKL prices slightly down from H1 2019AMERICAS• Strong demand for food, beverage and pharma packaging;
growing e-Commerce boosting demand for WKL• Increased total delivery volumes• Higher FBB and WKL euro prices compared to H1 2019APAC• Lower delivery volumes in FBB
22%
7%
65%
33%
FBB = Folding boxboardWKL = White kraftliners
2%
All-time high quarterly production volumes with improved safety
• All-time high paperboard production volume in Q2 2020: 489,000 tonnes
• Improved energy and material efficiency of the mills reduced production costs
• Improved safety in H1 2020: – LTA1: 5.1 (FY 2019: 5.5)– TRIF: 6.8 (FY 2019: 10.2)
H1 2020 Results7
LTA=Lost-time accident frequency per million hours workedTRIF=Total recordable injury frequency per million hours worked
69 62 34
5941
60
6443
60
39
0
50
100
150
200
250
2018 2019 2020
FX and lower production costs improved profitability
Sales, quarterly EUR million
492 487 472
519 477 473
475 489
458 478
0
500
1000
1500
2000
2018 2019 2020
8
Comparable operating result, quarterlyEUR million and % of sales
EUR
milli
on
EUR
milli
on
H1 2020 Results
FY 2018EUR 252 million margin: 13.0%
FY 2019EUR 184 million
margin: 9.5%
FY 2018EUR 1,944
million
FY 2019EUR 1,932
million Operating result:H1 2020: EUR 94mH1 2019: EUR 103m
Operating margin:H1 2020: 10.0%H1 2019: 10.7%
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Sales:H1 2020: EUR 945mH1 2019: EUR 964m
• Pulp prices (PIX) in H1 2020 vs H1 2019– European NBSK (USD) decreased by 24%*
– Chinese NBSK (USD) decreased by 17%*
• Pulp demand supported by increased demand in tissue and hygiene products, with reduced availability of recycled paper but weakened by a sharp decline in printing & writing paper consumption
• In H2, the pulp supply will decrease due to production curtailments announced by certain producers and several annual maintenance shutdowns
H1 2020 Results9
Market pulpPulp price (PIX) development in Europe and China
Long-fibre pulp, Europe Long-fibre pulp, China (net)
Source: Fastmarkets Foex
USD/tonne
*) calculated as the difference between half-year average prices
0
200
400
600
800
1 000
1 200
1 400
0
200
400
600
800
1 000
1 200
1 400
2014
2015
2016
2017
2018
2019
2020
USD/tonne
Update on 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
H1 2020 Results10
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
Foundation work for new recovery boiler started
• Foundation work for the recovery boiler started in March 2020• The processing of the environmental permit has progressed slightly slower than expected• Metsä Board estimates that the new recovery boiler will start up in H1 2022 at the earliest• Investment value for the first phase EUR 320 million
30 3654
30 36 3144
9080 72
20 2343
-3
2913
26 3750
34
-50
0
50
100
150
200
250
300
-50
0
50
100
150
200
250
300
Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20
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 development in operating cash flow continued
EUR
milli
on
H1 2020 Results
Long-term financial targets
Comparable ROCE:Target at least 12%
11.214.4
10.4 10.7
2017 2018 2019 H1 2020
1.2 1.0 1.1 1.1
2017 2018 2019 H1 2020
Net debt/comparable EBITDA:Maximum level 2.5x
Target > 12%
Target< 2.5x
1212 H1 2020 Results
76
50 5159
2016 2017 2018 2019
Dividend policy: Payout ratio at least 50% of net result
13
Near-term outlookJuly–September 2020
H1 2020 Results
• Paperboard delivery volumes in Q3 are estimated to decline from Q2. Price levels are expected to remain stable.
• Profitability will be weakened by major planned maintenance shutdowns, e.g. at the Kemi and Husum* integrate mills. Some smaller maintenance works have also been postponed from Q2 to Q3.
• Metsä Board’s market pulp deliveries in Q3 are expected to decline from Q2
• Production costs are not expected to decline further
*shutdown in Husum in September-October
Metsä Board’s comparable operating result for the third quarter of 2020 is expected to weaken compared to the second quarter of 2020.
H1 2020 Results14
Result guidance for July–September 2020
• Our business has performed well during the corona pandemic
– Good demand for Metsä Board’s pure and safe paperboards
– High paperboard production volumes– Good profitability with strong cash flow
generation
• The extent of negative impacts of the pandemic on global economy and MetsäBoard’s business still difficult to estimate
H1 2020 Results15
Summary
Appendix
H1 2020 Results18
Key financialsQ2/20 Q2/19
ChangeQ2/20
vs. Q2/19H1/20 H1/19
ChangeH1/20
vs. H1/19FY 2019
Sales EUR, m 473 477 - 0.8% 945 964 - 2.0% 1,932
EBITDA* EUR, m 87 68 + 27% 146 157 - 7% 279
Operating result* EUR, m 60 41 + 48% 94 103 - 8% 184
% of sales* % 12.8 8.6 10.0 10.7 9.5
Metsä Fibre’s share of operating result* EUR, m 1.6 15.6 - 90% -2.6 36 - 107% 43
Earnings per share EUR 0.15 0.10 + 43% 0.21 0.27 - 23% 0.41
ROCE* % 13.9 9.7 10.7 11.7 10.4
Total investments EUR, m 43 18 + 142% 73 24 + 201% 99
Cash flow from operations EUR, m 72 31 + 135% 152 67 + 127% 201
IB Net debt, at end of period EUR, m 306 380 - 20% 306 380 - 20% 308
*comparable
Metsä Board’s pure and safe paperboards are mainly used for consumer goods packaging and various retail needs
Folding boxboards, incl. food service boards
19
White kraftliners, coated and uncoated
Food and food service
Other consumer
goods (e.g. pharma,
cosmetics)
Graphic end-uses
Folding boxboard end uses*
Various retail needs (e.g. shelf-ready solutions, point-of-sale displays, fresh fruit boxes
Other consumer
goods (e.g. electronics)
E-commerce
White kraftliner end uses*
*) all data is indicative and based on Metsä Board’s own estimatesH1 2020 Results
H1 2020 Results20
Comparable operating result
Positive:+ lower production costs especially in paperboard business due to higher energy and material efficiency+ lower raw material and energy costs+ FX
Negative:- strikes at Finnish mills- Metsä Fibre’s result share
Q2 2020 vs. Q2 2019EUR 60 million vs EUR 41 million
Positive:+ lower production costs in pulp and paperboard business+ higher delivery volumes+ FX
Negative:- strikes at Finnish mills- weakened market pulp prices- Metsä Fibre’s result share
H1 2020 vs. H1 2019EUR 94 million vs EUR 103 million
0
50
100
150
200
250
2020 2021-2024 2025 2027
Bonds Loans from financial institutionsPension loans Finance lease liabilities
H1 2020 Results21
Debt and liquidity Maturity of interest-bearing debtTotal EUR 462 million
EUR
milli
on30 June 2020 • Total interest-bearing net debt was
EUR 306 million • Liquidity was EUR 353 million and
complementary items EUR 340 million• Liquid funds and investments of
EUR 153 million• Undrawn revolving credit facility
EUR 200 million, maturing in 2025• Metsä Group’s internal undrawn credit
facility of EUR 150 million and pension premium funds of EUR 190 million
Rating agency Rating and outlook Last update
S&P Global BBB- / stable 02/2018
Moody‘s Investor Services
Baa3 / stable 01/2019
Metsä Board’s credit ratings are investment grade
• Impact including hedges, actual– Q2 2020 vs Q2 2019: EUR +10 million– H1 2020 vs H1 2019: EUR +18 million
• Expected impacts including hedges– Q3 2020 vs Q2 2020: neutral– Q3 2020 vs Q3 2019: positive
Impacts from FX changes
USD56%SEK
35%
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 +61 million
SEK, kr EUR -37 million
GBP, £ EUR +8 million
22 H1 2020 Results
Main investments in growth and development 2014–2020E:
2020E Husum pulp mill renewal, finishing area modernization at Kyro mill
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 kraftliner production line conversion: 250,000 t/a of WKL
23
Total capex in H1 2020 EUR 73 millionFY 2020 estimate EUR 200 million
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
H1 2020 Results
NOTE! Estimated investments in 2020 are provisional and dependent on the environmental permit process related to the Husum pulp mill renewal
358 335 388 344 335 297 380 352 308 306
1.2 1.1 1.21.0 1.0 0.9
1.2 1.2 1.1 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 6/2020
Net debt, EUR million Net debt to comparable EBITDA (last 12 months)
24
Strong balance sheetNet debt at EUR 306 million, leverage 1.1x
Net debt / EBITDA target level: <2.5
EUR
milli
on
H1 2020 Results
H1 2020 Results25
Net financial costs in H1 2020 were EUR 7.5 million
31 36 22 15 8
3.8 3.3 3.3
3.32.5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
0
10
20
30
40
2016 2017 2018 2019 H1 2020
Net financial costs, EUR millionAverage interest rate at the end of period, %
EUR million %
• Net financial costs, including foreign exchange differences, in H1 2020 were EUR 7.5 million (H1 2019: 8.6)
• Average interest rate on loans at the end of the review period was 2.3% and the average maturity of long-term loans was 6.1 years
• Annual financial costs expected to increase by EUR 2 million with the Husum pulp mill renewal
Debt structure and liquidity on 30 June 2020
249182
8
23Bonds
Loans fromfinancialinstitutions
Pension loans
Finance leasesand other loans
8
153
200
Cash and cashequivalents
RCF, unraised
Interest-bearing debt EUR 462 million
Available liquidity*EUR 353 million
Average maturity of long-term loans on 30 June 2020 was 6.1 years.
26 H1 2020 Results
* Liquidity is complemented by Metsä Group’s internal undrawn short-term credit facility of EUR 150 million and undrawn pension loans of EUR 190 million
27 Read more about our ambitious sustainable targets for 2030 on our webpage H1 2020 Results
External recognition and commitments to Metsä Board on its actions in sustainability
A ‘Prime’ status In ISS ESG Corporate Rating .
‘Platinum’ in EcoVadis’ CSR ranking. Included in the top 1% of companies assessed in the manufacture of corrugated paper and paperboard and of containers of paper and paperboard industry.
Metsä Board has been on the CDP Climate A List every year since 2016. Metsä Board has A-in the CDP Water and Forest Programmes and in the Supplier Engagement Rating.
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 emission reduction targets are approved by the Science Based Targets initiative.
AAA in the MSCI ESG Ratings assessment (on a scale of AAA–CCC)
An overall ESG Risk Rating score of 17.6 and at low risk of experiencing material financial impacts from ESG factors.
Link to MSCI Terms and Conditions
“Advanced” in Vigeo Eiris ESG assessment.
H1 2020 Results28
Market cap and foreign owners30 June 2020
Ownership distribution30 June 2020
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 6/2020
Market cap, EUR millionShare of foreign owners, %
Metsäliitto Cooperative
48%
Domestic institutional investors
19%
Domestic private
investors19%
Foreign owners
14%
EUR million
29
%
H1 2020 Results
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 2020
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
H1 2020 Results
350400450500550600650700750800850900950100010501100115012001250
350400450500550600650700750800850900950
100010501100115012001250
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20
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
H1 2020 Results
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)
H1 2020 Results
150170190210230250270290310330350370390
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Spruce BirchPine
32
2022242628303234363840
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Spruce Birch Pine
FX rates development: EUR/USD and EUR/SEKEUR/USD
33
EUR/SEK
H1 2020 Results
1,05
1,07
1,09
1,11
1,13
1,15
1,17
1,19
10
10,2
10,4
10,6
10,8
11
11,2
11,4