Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board

 
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
Metsä Board Corporation
Investor presentation
January–September 2019
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
Contents
    This is Metsä Board …………………………       3    January-September 2019 Results ……..    32
    Planned investments ………………………..      14   Sustainability ……………………………….           45
    Profitability drivers …………………………..   19   R&D …………………………………………                   56
    Operating environment ……………………..     27   Owners, management, contacts ………....   67

2
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
Metsä Board in brief                                                                                          Sales split by product
    Year 2018: Sales EUR 1.9bn, comparable operating result EUR 252m,                                              Market
    ROCE 14.4%, Capex EUR 70m, Personnel 2,352                                                                      pulp                 Folding
                                                                                                                    18%                  boxboard
                                                                                                                                         56%
    Total paperboard capacity                                                                                                FY 2018:
              2Mt/a                                               8                                                White
                                                                                                                            EUR 1,944m

         Net pulp balance                                  production units                                   kraftlainer
          +600,000t/a                                  in Finland and Sweden                                        26%

    MAIN CUSTOMERS                                    STRONG MARKET POSITION                                       Sales split by region
    Brand-owners, converters, merchants               #1 in folding boxboard and white kraftliner in Europe                 APAC
    and manufacturers of corrugated products          #1 in coated white kraftliner globally                                 8%
                                                      Largest European importer of folding boxboard to US
    TOP10 customers: ~25% of sales
    Largest customer:
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
Our focus is on premium fresh fibre paperboards mainly
    used for consumer goods packaging
    Total paperboard capacity 2Mt, of which 2/3 folding boxboard and 1/3 white kraftliners
    Folding boxboards and Food service boards                            White kraftliners, coated and uncoated

                   Folding boxboard end-uses*                                               White kraftliner end-uses*
                    Graphical                                                                   E-commerce
                    end-uses
                                                                                               Other
                                      Food and Food                                        consumer                 Shelf-ready and
                   Other              service                                            goods (e.g.                Point-of-sale
               consumer                                                                  electronics)               (food,
              goods (e.g.                                                                                           beverages,
                 pharma,                                                                                            cosmetics)
              cosmetics)                        *) all data is indicative and based on
4                                                 Metsä Board’s own estimates
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
Our fresh fibre paperboards offer solutions for global trends

GLOBALISATION AND     SUSTAINABILITY     FOOD SAFETY          E-COMMERCE
URBANISATION
                      We use only        We have good         Our paperboards
We offer recyclable   renewable fresh    control of raw       offer a strong
products that are     fibres from        materials, which     promotion and
ideal for the         sustainably        guarantees purity    branding
circular economy      managed northern   and safety in food   experience
                      forests            contact uses
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
We have a leading position in Europe in our
    main products
     Folding boxboard                       White kraftliner
                                                                        • Regional sales split of
         in Europe                            in Europe                   paperboard deliveries (2018):
    Total capacity 3.8m tonnes          Total capacity 2.1m tonnes
                                                                              • 70% EMEA
                                                                              • 23% Americas
     Others                    Metsä        Others              Metsä
                                                                              • 7% APAC
                               Board   #5                       Board
                                #1                               #1     • In APAC we focus on high-
    #5

    #4
              35%                      #4
                                                 32%                      quality FBB segment
                                                                        • We are the largest European
                                                                          importer of FBB to US

         #3
                                            #3                          • We are #1 in coated white
                          #2                               #2
                                                                          kraftliners globally

6
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
Our production is close to our main raw material
                 Total paperboard capacity:                             Our net balance in pulp in 2019,
        Folding boxboard (FBB): 1,345,000 t/a                           including the 24.9% ownership in
           White kraftliner (WKL): 675,000 t/a                          Metsä Fibre, is 600,000 t/a
                                                 Wood sourced from
                                                 Finland, Sweden,
                             Kemi                Baltics and Russia.   Äänekoski
                             425,000 t/a WKL                           255,000 t/a FBB
                             610,000 t/a Pulp*                         1.3 million t/a Pulp*

                             Husum, SWE                                Simpele
                             400,000 t/a FBB                           290,000 t/a FBB
                             250,000 t/a WKL
                             730,000 t/a Pulp

                             Kaskinen                                  Joutseno
                             370,000 t/a BCTMP                         330,000 t/a BCTMP
                                                                       690,000 t/a Pulp*

                             Kyro                                      Tako
                             190,000 t/a FBB                           210,000 t/a FBB

    *Metsä Fibre mill
7
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
We have good control of wood raw materials,
    from forests to pulp and board production
    •    High availability of Northern wood
    •    Consistent quality of fibres that are tailor-made for the end products

                                                   METSÄ GROUP

                                            METSÄLIITTO COOPERATIVE
                            Group’s parent company, owned by 103,000 Finnish forest owners

              METSÄ               METSÄ                   METSÄ                 METSÄ               METSÄ
              FOREST              FIBRE                   WOOD                  BOARD               TISSUE

        Wood supply and     Pulp and sawn          Wood products         Paperboard          Tissue and
        forest services     timber                                                           greaseproof papers

                                                    METSÄ BOARD
                                                     OWNS 24.9%

                                        Through Metsä Fibre’s ownership Metsä
                                          Board’s annual net pulp balance is
8                                            600,000 tonnes long in 2019
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
We have been growing well above average market
            growth rate during past years …
                      Metsä Board’s annual paperboard deliveries and current capacity, 1,000 tonnes

                                                                             Total paperboard capacity 2 million tonnes
                   2 000                                                                                                        2 000

                   1 500                                                                      658                615            1 500
    1,000 tonnes

                                                                              580
                                                             539
                   1 000                        444                                                                             1 000
                             373

                                                                                              1144              1215
                    500                                                       988                                               500
                             763                801          865

                      0                                                                                                         0
                             2013              2014         2015             2016             2017              2018
                              White kraftliner deliveries     Folding boxboard deliveries           Total paperboard capacity

9                                      * During 2013-2017 the demand growth for FBB and WKL was ~3%/year
Metsä Board Corporation Investor presentation - January-September 2019 - Metsä Board
… driven by paperboard capacity increases
                          Capital expenditure and depreciation

                                                                                          Investments in growth 2011–2018:
                   180

                   150                                                                    2019       New sheeting line in Äänekoski

                   120                                                                    2018       New baling line in Kaskinen BCTMP mill:
                                                                                                     30,000 new BCTMP capacity
     EUR million

                    90                                                                    2017       New extrusion coating line in Husum:
                    60                                                                               100,000 t/a PE coating capacity
                                                                                          2015–16    New folding boxboard production line in
                    30                                                                               Husum: 400,000 t/a of FBB and linerboard
                                                                                                     production line conversion: 250,000 t/a of
                     0
                         2011   2012   2013   2014   2015   2016    2017    2018 2019E               WKL
                                                                                          2011–12    Debottlenecking in Simpele, Äänekoski and
                            Maintenance capex        Growth capex          Depreciation              Kyro mills: total 150,000 t/a of FBB

                   Note! Estimated 2019 capex includes the first instalments related to Husum pulp mill renewal
10
Our long-term financial targets aim for profitability
     and a strong balance sheet

     Comparable ROCE:                         Net debt/comparable EBITDA:               Dividend policy:
     At least 12%                             Maximum level 2.5x                        Payout ratio at least 50% of net result

                                                                                                  76

                          14.4                                             < 2.5x
                                                    2.0                                                     50
                                 11.8                                                   44                           51
     11.3          11.2                                                                                                    > 50%
                                     > 12%
            8.1                              1.2           1.2           1.2
                                                                  1.0

     2015   2016   2017   2018   LTM         2015   2016   2017   2018   LTM           2015      2016      2017     2018

                                                                                    LTM = last twelve months
11
Our aim is to create the highest possible
      shareholder value
                                                               CAGR in dividend
                                                                     +30%
      Dividend, EUR and payout ratio, %                            in 2012–2018   Enterprise value, EUR million
     0,30                                                           100%
                                                                                  3500
     0,25                                                                         3000
                                                                    75%
     0,20                                                                         2500

     0,15                                                           50%           2000

                                                                                  1500
     0,10
                                                                    25%           1000
     0,05
                                                                                   500
     0,00                                                           0%
            2012 2013 2014 2015 2016 2017 2018                                       0
                                                                                         2012   2013     2014   2015   2016   2017   2018 9/2019
               Dividend, EUR               Dividend/EPS, %

                Note! Year 2018 total distribution consists of a                         Net debt      Market capitalization, EUR million
                dividend of EUR 0.10 and other distribution of
                equity of EUR 0.19 per share
12
Capital allocation
                                                                         Free cash flow in EUR million and % of EBITDA
     •   Capital allocation for 2019                                     EUR million                                               %
          –    EUR 103 million dividend paid in April                    200                                     Comparable        80
                                                                                                                 EBITDA, LTM,
          –    Capex: Estimated EUR 90-100 million, including the                                                EUR 301 million
                                                                         150                                                       60
               first instalments of Husum pulp mill renewal

     •   Estimated impacts on capital allocation from                    100                                                       40
         Husum pulp mill renewal going forward                            50                                                       20
          –    Capex EUR 320 million in 2019-2022
                                                                           0                                                       0
                •    2020 and 2021 will be the main investment years –
                     capex split to be communicated when the timing of    -50                                                      -20
                     the environmental permit is known

          –    Financing mainly through incremental debt –               -100                                                      -40
               cost
Planned investments:
Renewal of Metsä Board Husum pulp mill
New bioproduct mill and a sawmill line by Metsä Fibre
Metsä Board and Metsä Fibre are planning three major
investments with total value of EUR 2 billion
The aim is to further improve the competitiveness of pulp and energy production
and move towards fossil-free mills

Metsä Board: Husum, SWE         Metsä Fibre: Kemi, FIN         Metsä Fibre: Rauma, FIN
Renewal of the pulp mill        New bioproduct mill            New pine sawmill line
EUR 320 million (first phase)   EUR ~1.5 billion               EUR ~200 million

                                          Metsä Board owns 24.9% of Metsä Fibre
Metsä Board is planning to renew its pulp mill in
     Husum integrate in Sweden
     The renewal of the pulp mill would:
     ➢     Create a solid foundation to increase paperboard capacity in the integrate in the future
     ➢     Secure cost efficient pulp and energy production
     ➢     Enable the company to reach its ambitious target of fossil-free mills by 2030

     The first phase* of the investment
     Investment value is EUR 320 million, divided over 2019–2022
     Prefeasibility     Company to apply         Final investment                          New recovery boiler and
     study on the                  for an       decision expected                          turbine expected to be in
     renewal               environmental            to be made in                          operation, at the earliest
     concluded                    permit                 Q2 2020,
                                                    at the earliest

                      2019                        2020                          2021                             2022

                        * The second phase of the investment would include the replacement the old fibre lines with one
16                      new line and take place during the 2020s after the first phase is fully completed
Update on planned renewal
     Announced after the review period on 31 October

     • Background: On 27 August, Länsstyrelsen1)
       decided that the planned new recovery boiler
       will require an amendment to the environmental
       permit
     • Metsä Board aims to minimize the delay
       caused by the permit process and will make
       financial commitments up to EUR 100 million2)
       before the final investment decision
     • Final investment decision will be made after
       receiving the environmental permit, estimated
       in Q2 2020, at the earliest

               1) Competent authority in Sweden
17
               2) Included in the total investment value of EUR 320 million
Estimated impacts on the
     first phase of the investment
     • Self-sufficiency in electricity to increase from the current
       40% to over 80%*

     • Reduced amount of purchased oil
     • Lower maintenance capex and costs
        –   Extended intervals between planned shutdowns
        –   Reduced duration of the planned shutdowns
            → Increased pulp and paperboard production
     • Annual cash flow improvement EUR 35 million, of which EUR
       30 million EBITDA improvement and EUR 5 million lower capex
     • Financing costs to increase EUR 2 million per year

                  *)   Annual increase in electricity production about 330 GWh, resulting in cost
18                         savings at current electricity prices of approximately EUR 12 million
Metsä Fibre is planning
     two major investments
     New bioproduct mill* in Kemi, Finland
     • Size of the investment EUR 1.5 billion
     • Annual capacity 1.5 million tonnes of chemical pulp and
       several other bioproducts
     • Final investment decision expected in the summer of 2020
        –   environmental permit application filed in September 2019

     New sawmill line in Rauma, Finland
     • Size of the investment EUR 200 million
     • Annual capacity 750,000 cubic meters
     • If realised, would be the most modern and efficient sawmill
       line in the world
     • Final investment decision in the beginning of 2020

                      *)
                       would replace the existing pulp mill in Kemi, with
19
                      annual capacity of 630,000 tonnes of chemical pulp
Main contributors in
Metsä Board’s profitability
Our main profit components and sensitivities
     Component           Unit                 Change           Impact on EBIT             Annual FX transaction exposure
                                                                                               total EUR 1.1 billion
     Folding boxboard    Price                +/- 10%        > EUR 100 million                          Others
                                                                                                GBP      2%
                                                                                                7%
     White kraftliners   Price                +/- 10%          ~ EUR 50 million

     FX                  USD/EUR              +/- 10%            EUR 65 million                                       USD
                                                                                         SEK                          57 %
                                                                                         34 %
                         SEK/EUR              +/- 10%            EUR 40 million

     Pulp                PIX price of SW/HW   +/- 10%            EUR 25 million
                         per tonne

     Wood                Cost, delivered to   +/-10%            EUR 40 million*     In 2018, Metsä Board sourced 5.5 million m3
                         Finnish mills                                              wood, of which 37% from Sweden, 28%
                                                                                    Finland, 20% Baltics and 15% Russia.
                         Cost, delivered to   +/-10%             EUR 20 million     Including the 24.9% share from Metsä Fibre,
                         Husum                                                      the total sourcing was 8.5 million m3
                                                 * incl. ownership in Metsä Fibre
21
Costs have remained at a high level in 2019
     after the rapid rise in 2018
                                                                             Metsä Board’s cost split in 2018
                                                                             incl. 24.9% share of Metsä Fibre’s costs
     Cost          Estimated development in 2019 vs. 2018
     component                                                                          Other
     Wood          Rapid rise in 2018. Stabilised but high price level in
                                                                                        fixed
                   2019 leads to slightly higher costs year-on-year.                    14%
                                                                                                              Wood
                   Small decline in Baltics at the end of H1.                                                 28%
     Logistics     Stable                                                   Personnel
                                                                              13%
     Chemicals     Stable or slightly lower

     Energy        Lower costs year-on-year. Offsets the increase in
                   wood costs.                                                Energy
                                                                               14%                           Logistics
     Personnel     Stable or slightly lower
                                                                                                               16%
                                                                                            Chemicals
     Other fixed   In line with or below general cost inflation                               15%

                                                                                 Metsä Board’s total costs in 2018:
                                                                                         EUR 1.7 billion
22                                                                                    (2017: EUR 1.6 billion)
Price development of folding boxboard and
     white kraftliner in Europe
     EUR/ tonne                                                                                     EUR/ tonne

     1200                                                Folding boxboard                               1200
     1100                                                                                               1100
     1000                                                                                               1000
      900                                                                                               900
                                                        White-top kraftliner
      800                                                                                               800
      700                                                                                               700
      600                                                                                               600
      500                                                                                               500
                  2010   2011   2012   2013   2014    2015     2016      2017     2018       2019

23                                            Sources: Fastmarkets RISI & Fastmarkets FOEX
Price development of pulp in Europe (PIX)
     Long-fibre (SW) and short-fibre (HW) pulp
     USD or EUR                                                                          USD or EUR
     1250                                                                                     1250
     1200                                        Long-fibre, USD                              1200
     1150                                                                                     1150
     1100                                                                                     1100
     1050                                       Short-fibre, USD                              1050
     1000                                                                                     1000
      950                                                                                     950
      900                                                                                     900
      850                                                                                     850
      800                                                                                     800
      750                                                                                     750
      700                                                                                     700
                                                                     Long-fibre, EUR
      650                                                                                     650
      600                                                                                     600
      550                                                                                     550
      500                                                     Short-fibre, EUR                500
      450                                                                                     450
      400                                                                                     400
      350                                                                                     350
            '10   '11   '12   '13   '14   '15       '16      '17      '18        '19

                                                                   Source: Fastmarkets Foex
24
Price development of roadside pulpwood in Finland
      and Sweden
     Pulpwood roadside prices in Finland, EUR/m3                                  Pulpwood roadside prices in Sweden*, SEK/m3

     40
                                                                                 390
     38                                                                          370
     36                                                                          350
     34                                                                          330
                                                                                 310
     32
                                                                                 290
     30                                                                          270
     28                                                                          250
     26                                                                          230
                                                                                 210
     24                                                                          190
     22                 Spruce               Birch          Pine                 170                  Spruce                Birch              Pine
     20                                                                          150

                                                                                       2010

                                                                                              2011

                                                                                                     2012

                                                                                                            2013

                                                                                                                   2014

                                                                                                                          2015

                                                                                                                                 2016

                                                                                                                                        2017

                                                                                                                                               2018

                                                                                                                                                      2019
                               2013
          2010

                 2011

                        2012

                                      2014

                                              2015

                                                     2016

                                                            2017

                                                                   2018

                                                                          2019

                                         Sources: Luke (Natural Resources Institute Finland) and Skogsstyrelsen (The Swedish Forest Agency)
25
FX rates development: EUR/USD and EUR/SEK
     EUR/USD                EUR/SEK

      1,26                     11
      1,24
                              10,8
      1,22
                              10,6
       1,2
      1,18                    10,4

      1,16                    10,2
      1,14
                               10
      1,12
                               9,8
       1,1
      1,08                     9,6

26
Operating environment for
fresh fibre paperboards
Paperboard is roughly one third of total packaging market

    The total packaging market is USD 850 billion       Average annual growth rate of paperboard packaging

                  Glass                                      350
                                  Paperboard                        +3% per year 2017–2022
        Metal          7%                                    300

                 13%                                         250
                              36%

                                                    USD bn
                            USD                              200
                            300 bn
                                                             150
                 34%
                                                             100
                              10%
       Plastic                       Other                    50
                                     fibre-
                                     based                     0
                                                                   2012 2013 2014 2015 2016 2017      2022F
                                                                                                   Source: Smithers Pira
Metsä Board operates in a growing market
                          Cartonboard growth forecast                                                                                                                            Containerboard growth forecast
                          70000                                                                                                                                                  225

                                                                                                                                                                                 200
                          60000
                                                                                                                                                                                 175

                                                                                                                                                         Million metric tonnes
                          50000                                                                                                                                                  150
     1000 metric tonnes

                          40000                                                                                                                                                  125

                                                                                                                                                                                 100
                          30000
                                                                                                                                                                                  75
                          20000
                                                                                                                                                                                  50
                                                                            Asia 2.5%/a
                          10000                                                                                                                                                   25

                              0                                                                                                                                                   0

                                                                                                                                                                                       2017
                                                                                                                                                                                              2018
                                                                                                                                                                                                     2019
                                                                                                                                                                                                            2020
                                                                                                                                                                                                                   2021
                                                                                                                                                                                                                          2022
                                                                                                                                                                                                                                 2023
                                                                                                                                                                                                                                        2024
                                                                                                                                                                                                                                               2025
                                                                                                                                                                                                                                                      2026
                                                                                                                                                                                                                                                             2027
                                                                                                                                                                                                                                                                    2028
                                                                                                                                                                                                                                                                           2029
                                                                                                                                                                                                                                                                                  2030
                                                                                                                                                                                                                                                                                         2031
                                                                                                                                                                                                                                                                                                2032
                                                                                                                                                                                                                                                                                                       2033
                                  2017
                                         2018
                                                2019
                                                       2020
                                                              2021
                                                                     2022
                                                                            2023
                                                                                   2024
                                                                                          2025
                                                                                                 2026
                                                                                                        2027
                                                                                                               2028
                                                                                                                      2029
                                                                                                                             2030
                                                                                                                                    2031
                                                                                                                                           2032
                                                                                                                                                  2033

29
                                                                                                                                                                                                              Source: RISI Paper Packaging Forecasts
We have good growth opportunities in premium
            paperboards
                                                                                                                               FSB
                                                                                                                                                    36%

                       Americas                                                     EMEA                                       FBB                   APAC
                                                                                                                              Other
                                                                                                                         fresh fibre
                                                                                                                             grades

               FSB                                                   FSB
                               28%
               FBB                                                   FBB                  41%

             Other                                                  Other                                                 Recycled
        fresh fibre                                            fresh fibre                      CWKL                        grades
                                                                   grades                                          38%
            grades                                                                               WKL

                                                                Recycled                                                                                      WKL
         Recycled                  CWKL                                                      White
                                                         77%      grades                                                                                     White
           grades                    WKL                                                   testliner                                                      testliner
                           White testliner

                Cartonboard          White linerboard                  Cartonboard              White linerboard                 Cartonboard                White linerboard

Total annual      10 million                 3 million                       10 million                5 million                       22 million                     3 million
    demand:        tonnes                     tonnes                          tonnes                    tonnes                          tonnes                         tonnes

                          FSB = food service board, FBB = folding boxboard, SBS & CUK = other fresh fibre grades, WLC = recycled grades
                          WKL = uncoated white kraftliner, CWKL=coated white kraftliner
30                                                                                                                       Source: Metsä Board research based on several sources,
                                                                                                                         e.g. CEPI Cartonboard and Containerboard, RISI
Metsä Board’s fresh fibre linerboards are at the top of
     the quality pyramid
     Global annual demand in containerboards totals 170 million tonnes
       White            White
       coated          uncoated
      kraftliner       kraftliner
        1Mt              3Mt

                                       White       Brown        Brown
          White kraftliner
                                      testliner   kraftliner   testliner
               4Mt
                                        7Mt         24Mt         67Mt

                   White linerboard                Brown linerboard                             Fresh fibre     Recycled
                                                                                                  fluting        fluting
                        11Mt                            91 Mt                                       8Mt           60Mt

                                    Linerboards                                                          Fluting
                                       102Mt                                                              68Mt

                                                  Total containerboard market
                                                             170Mt

31                                                                         Source: Metsä Board’s own estimate based on several sources
Paperboard demand and supply by region
     Share of Metsä Board’s total paperboard deliveries in 2018:
              AMERICAS                              EMEA                           APAC
                23%                                  70%                            7%

     • Decreasing local supply of      • Stable demand in FBB, but    • Growing upper/middle class
       SBS/FSB and declined              customers operate with low     and increased purchasing
       imports from China                stocks                         power support demand for
     • FSB demand growing                                               paperboard
                                       • Environmental commitments
     • Stable market situation in        and regulations support      • Plenty of local supply in
       coated WKL                        demand for sustainable         cartonboard
                                         packaging materials
                                                                      • Metsä Board’s focus is on
                                       • No significant growth in       high-quality segment
                                         cartonboard supply
                                       • Several conversions from
                                         paper into containerboard
                                         production
32
Branding and personalisation
     becoming more important in
     E-commerce
     • Functionality, durability and consumer experience are the
       key words
     • Demand for white kraftliner driven by
        –   Increasing branding of the packaging
        –   Trend towards shipping the product in its own container
        –   Personalisation of boxes, supported by advanced technology
            in digital printing
     • The global value of E-commerce is expected to grow by
       20% per year on average, increasing its share of the retail
       trade from 10% to 18% in 2017–2021

33                                                  Sources: eMarketer, Smithers Pira
Results for
January– September 2019
Key financials
                                                              Change                   Change
                                                               Q3/19   Q1-Q3   Q1-Q3   Q1–3/19
                                              Q3/19   Q3/18                                      FY 2018
                                                                vs.    2019    2018      vs.
                                                               Q3/18                   Q1–3/18
     Sales                           EUR, m   489     475      3%      1,453   1,486    -2%         1,944
     EBITDA*                         EUR, m    62      84      -26%     220     263     -16%         344
     Operating result*               EUR, m    43      64      -33%     145     192     -24%         252

      % of sales*                      %       8.7    13.4             10.0    12.9                  13.0
     Metsä Fibre’s share of
                                     EUR, m    6       34      -83%     44      92      -52%         124
     operating result*
     Earnings per share               EUR     0.09    0.16     -44%    0.36    0.43     -16%         0.57

     ROCE*                             %       9.7    15.0             11.0    14.7                  14.4

     Capex                           EUR, m    18      11      67%      42      36      16%            70

     Cash flow from operations       EUR, m    44      54      -19%     111     121     -8%          151

     IB Net debt, at end of period   EUR, m   352     344      2%       352     344      2%          335

35                 *comparable
Q3 in summary
     • Favourable development in paperboard business
        – Higher paperboard volumes, stable price
          levels and lower costs compared to Q2 2019
     • Market pulp prices continued to decline with a
       negative impact on the result
     • Planned maintenance shutdowns in Kemi and
       Husum integrates

     Announced after the review period on 30 October:
     Planned renewal of Metsä Board’s Husum pulp mill
     proceeds. Company to make financial commitments
     prior to the final investment decision

36
Higher kraftliner volumes pushed total paperboard
                    deliveries up in Q3
                                                                                                +4%
                           White kraftliner         Folding boxboard                                           +5%
                    500
                                                                                  447                    445         466

                    400                                                  161
                                    173       170               171                                                  161
                                                                                  149    134     138      146
                           163                          152
     1,000 tonnes

                                                                                                                            1,000 tonnes
                    300

                    200
                                    304       299               297      328      297            302     299         305
                           265                          276                              293
                    100

                      0
                          Q1 2017 Q2 2017 Q3 2017     Q4 2017 Q1 2018 Q2 2018 Q3 2018   Q4 2018 Q1 2019 Q2 2019   Q3 2019

                                                                  Q1-Q3 2018 total:                    Q1-Q3 2019 total:
                                                                   1,405k tonnes                        1,352k tonnes
37                                                                                        -4%
Year-to-date paperboard deliveries by grade
     Biggest deviations in WKL in EMEA and FBB in APAC
     Folding boxboard (FBB) deliveries in tonnes          White kraftliner (WKL) deliveries in tonnes
     January–September 2019 (1–9/2018)                    January–September 2019 (1–9/2018)
                   APAC                                                 APAC
                   77,000                                             7,000 (3k)
                    (92k)
                                                                           2%
                            9%                        Americas
      Americas                                        147,000                                EMEA
      185,000                                          (134k)                               290,000
       (192k)                                EMEA                   33%                      (344k)
                   20%                      645,000
                                                                                   65%
                                             (637k)
                                  71%

                   Total FBB deliveries                            Total WKL deliveries
                 1–9/2019: 907,000 tonnes                        1–9/2019: 445,000 tonnes
                    (1–9/2018: 922,000)                             (1–9/2018: 481,000)
38
January–September 2019 (1-9/2018)
                   Sales were roughly at the same level but operating
                   result weakened

                   Sales                                                            Comparable operating result
                   EUR million                                                      EUR million and % of sales

                   2000                                                             300                                                       15,0
                                                                                                                 13.0%   12.9%
                   1600                          1,486   1,453                      240                10.5%                      10.0% 12,0
                                                                                                                          192                           Operating
     EUR million

                                                                      EUR million
                   1200                           475     489                       180     8.0%                                              9,0
                                                                 Q3                                                               145                      result,
                                                                                                                          64
                                                                                                                                                       % of sales:
                   800                            519     477                       120                                           43     Q3   6,0
                                                                 Q2                                                                                   Q3/19: 8.7%
                                                                                                                          59
                                                                                                                                  41     Q2           Q2/19: 8.6%
                   400                                                               60                                                       3,0
                                                  492     487    Q1                                                       69                         Q1/19: 12.7%
                                                                                                                                  62     Q1
                      0                                                               0                                                       0,0
                            2016   2017   2018   Q1–Q3   Q1–Q3                              2016       2017      2018    Q1–Q3   Q1–Q3
                                                  2018    2019                                                            2018    2019

39
Year-to-date result was supported by higher paperboard
     prices and FX, negative from pulp and production costs

     Comparable operating result                       Comparable operating result
     Q3 2019 vs. Q2 2019                               Jan-Sep 2019 vs. Jan–Sep 2018
     Q3 2019: EUR 43 million (EUR 41 million)          Q1–Q3 2018: EUR 145 million (EUR 192 million)
     Positive:                                         Positive:
     + favourable development in paperboard business   + higher prices in FBB and WKL
     + lower costs                                     + FX
     + lower depreciation

     Negative:                                         Negative:
     - weakened market pulp prices                     - weakened market pulp prices and volumes
     - Metsä Fibre’s result share                      - Metsä Fibre’s result share
     - more maintenance                                - higher production costs in paperboard and pulp

40
Market pulp prices in China and Europe have
         declined throughout the year
                                                                                         Pulp price (PIX) development in Europe and China
     •    The PIX price of NBSK has declined by
          roughly 30% in Europe and by 40% in                                                     Long-fibre pulp, Europe                   Long-fibre pulp, China (net)
          China from their highest levels in 2018                                       USD/tonne                                                               USD/tonne

     •    Net prices in China and Europe are                                             1 400                                                                    1 400

          approaching each other                                                         1 200                                                                    1 200

                                                                                         1 000                                                                    1 000
     •    Seasonally higher demand at year end
                                                                                           800                                                                    800
     •    Some producers have announced price
                                                                                           600                                                                    600
          increases in China
                                                                                           400                                                                    400
     •    Producers’ inventory levels have                                                 200                                                                    200
          decreased but are are still high
                                                                                              0                                                                   0

                                                                                                                                                 2018
                                                                                                   2013

                                                                                                          2014

                                                                                                                   2015

                                                                                                                            2016

                                                                                                                                     2017

                                                                                                                                                         2019
                                                                                                                             Source: Fastmarkets Foex
41                    Note! The specifications of PIX China Net index were renewed in the beginning of 2017. Earlier data not comparable with new
Year-to-date cash flow from operations EUR 111 million
     (1–9/2018: EUR 121 million)
                                                                                                                                                  250
                   250

                                                                                                                                                  200
                   200

                   150                                                                                                                            150
     EUR million

                                                                                                                                                        EUR million
                                   106
                   100                                                                                                                            100
                                           79
                         68
                              59                                             54   43                                                    44
                    50                            30            36                         30             36             31                       50
                                                                     23                                         29                           26
                                                        20                                                                     13
                     0                                                                                                                            0
                                                                                                 -3
                   -50                                                                                                                            -50
                         Q3/17      Q4/17          Q1/18        Q2/18        Q3/18          Q4/18          Q1/19          Q2/19          Q3/19

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

42                                                                                Free cash flow = cash flow from operations − investments
Net debt at EUR 352 million, leverage 1.2x
           On 30 September, Metsä Board signed a financing facility with sustainability targets consisting of
           EUR 150 million term loan and EUR 200 million RCF to replace existing loan (EUR 50 million) and RCF (EUR 150 million)

                                  Net debt, EUR million            Net debt to comparable EBITDA (last 12 months)
                   600                                                                                                               3,0
                                                                                          Net debt / EBITDA target level:
Debt and its maturity                                                                 Metsä Board’s both credit ratings are investment grade

                                                                                                   Rating agency          Rating and        Last update
           • On 30 September, Metsä Board agreed on a new bank financing                                                     outlook
             facility consisting of five-year term loan of EUR 150 million1) and                   S&P Global                  BBB-              02/2018
             five-year RCF of EUR 200 million to replace the drawn loan of EUR                                                stable   Upgrade from BB+
             50 million2) and undrawn RCF of EUR 150 million                                       Moody‘s Investor            Baa3             01/2019
                                                                                                   Services                   stable   Upgrade from Ba1
           • Interest-bearing debt on 30 September was EUR 461 million
             (30.9.2018: EUR 469 million)
                                                 1)   drawn and booked after the review period
                                                 2)   earlier drawn loan that would have expired on 2020

                         Long-term interest-bearing debt maturity profile as per 30 September 2019
                   250

                   200
     EUR million

                                                                                                                                In addition, Metsä
                   150                                                                                                          Board has
                   100
                                                                                                                                unraised pension
                                                                                                                                loans of EUR 166
                   50                                                                                                           million
                                                                2)
                    0
                            2019                      2020                        2022–26                          2027

                                Bonds      Loans from financial institutions      Pension loans            Other loans
44
Near-term outlook

     • Paperboard delivery volumes in Q4 are
       expected to decline from Q3 levels due
       to seasonally slower December
     • Stable price levels for FBB and WKL
     • Pulp prices remain low globally
     • Less planned maintenance shutdowns
     • Stable production costs and FX impacts
       in Q4 compared to Q3
     • Metsä Board’s comparable operating
       result for the fourth quarter of 2019 is
       expected to remain roughly at the same
       level as in the third quarter of 2019

45
Sustainability
“Our comprehensive approach
                                                                  to reducing our environmental
     Sustainability is on                                           impact means looking at all

     everybody’s agenda                                            aspects of our business, how
                                                                  they intersect and how we can
                                                                     integrate new solutions to
                                                                       create meaningful and
                                                                         sustained change.”
     • Growing consumer awareness:
                                                                       – Starbucks website
       Origin and transparency of
       materials, renewability, resource
       efficiency and recylability
     • Brand owners are committed to
       reducing their carbon footprints:   “We want low-carbon to become
                                           the new normal, so we’re taking
       Lighter packaging reduces CO2       action to reduce GHG emissions
       emissions across the value chain      throughout our value chain.”

                                                 – Unilever website

47
Alternative to plastics:
     Paperboard adds value to packaging
     • Consumers regard paperboard as a more responsible choice than plastic packaging –
       willingness to pay more for it
     • Paperboard cartons preserved the cherry tomatoes at least as well as the plastic equivalent
     • The climate effect of a recycled PET container was calculated at six times higher than the average
       value for the paperboard cartons
                                                 A detailed consumer study with cherry tomatoes was carried out in Finland by Sense N Insight,
                                                 Luke (Natural Resources Institute Finland) and Metsä Board

48
Fresh fibre paperboards offer solutions to major challenges

Increased waste         Replacing fossil-        Reducing carbon      Ensuring food
generation due to       based materials,         footprint            safety
urbanisation            i.e. plastics            The solution:        The solution:
The solution:           The solution:            renewable energy,    pure and safe
Paperboard is           renewable and            efficient energy     fresh fibres in food
recyclable              biodegradable            and water usage in   packaging
– and widely            wood fibre               production
recycled
Lighter packaging reduces CO2 emissions across the
value chain – Our fossil CO2 emissions per product tonne
have reduced by almost 50% since 2009

  Less energy, water and
  raw material consumed

                                          Less waste
                                          generated

                           Less
                           transport
                           weight
Wood is our main raw
      material

     • Metsä Board sources its wood mainly from
       Finland and Sweden (65%)
     • All wood used is 100% traceable and comes
       from sustainably managed forest sources
       ensuring the bio-diversity and recreational use
       of forests
     • 79% of wood sourced is certified (remaining
       21% from controlled forest sources)
     • Our target is that >90% of our used wood fibre
       is certified by 2030

51
Finland – the largest forest cover in Europe

                                                             The area of Finland

                                                              5%          Cities, villages and roads
                   Annual growth of Finnish forests is       10%
      100+
      MILLION M3
                   over 100 million m 3 – more than ever
                                                             10%
                                                                          Fields and agricultural use

                                                                          Lakes and rivers

                   Forests grow more than they are used,
                   annual harvesting 72 million m 3 (2017)

                   Four seedlings are planted for each
                   harvested tree                            75%          Forest

                   Over 20% of the Finnish export comes
                   from forest-based products

52
We have decreased our
     process water use by 20%
     since 2010

     • Metsä Board uses only
       surface water in its processes
     • Water is been recirculated
       in processes several times
     • 99% of the water used is returned
       back to the close-by waterways
       after thorough purification

53
Primary energy used in 2018
                                                                                                                         (total 12.0 TWh)
     Our energy efficiency has improved
                                                                                                    Fossil-based
     by almost 12% during 2009–2018                                                                         18%

                                                                                                                                              Renewable,
                                                                                                                                              mainly
                                                                                                                                              wood-based
                                                                                                       Nuclear
                                                                                                                                              55%
                                                                                                        power
     • Over 80% of primary energy we use is fossil free                                                  27%

     • After OL31) starts up, we will be nearly self-sufficient in
       electricity in Finland
                                                                                                             Electricity sourced in 2018
           − Including the electricity used in Husum mill,                                                          (total 2.4 TWh)
             self-sufficiency will be nearly 80%                                                                      Outsourced
                                                                                                                      generation
     • Metsä Board’s shareholding in PVO2) is 3.2%                                                                       3%                 Own
                                                                                                                                            generation
           − Fair value as per 31 December 2018 was EUR 266 million                                              3)
                                                                                                                                            21%
                                                                                                  Purchased
                                                                                                   electricity
                                                                                                        44%
                                                                                                                                              Through
                      1)   Olkiluoto Nuclear Power Plant                                                                                      PVO
                                                                                                                                              shareholding
                      2)   Pohjolan Voima Oyj is a non-listed public limited liability company.                                               32%
                           It supplies electricity and heat for its shareholders at cost price
                      3)   Out of 44% share of purchased energy, 14% is from Metsä Fibre
54
Metsä Board’s strategic 2030 sustainability objectives and targets
      WE BRING                         WE WORK FOR A                   WE OFFER                        WE CREATE
      THE FOREST TO YOU                BETTER                          SUSTAINABLE CHOICES             WELL-BEING
                                       CLIMATE AND
     Certified wood fibre              ENVIRONMENT
     • Share of certified fibre >90%
                                       Fossil free mills                Fossil free raw materials      Responsible corporate culture
     Increasing the amount of          • Fossil CO2 emissions           • Share of fossil free raw     • Ethics barometer 100%
     carbon stored in forests and        0 tCO2 (Scope 1)                 materials 100%
     products                                                                                          Accident-free work
     • Area of regeneration and        Fossil-free purchased energy     Sustainable supply chain       environment
        management of young stands     • Fossil CO2 emissions,          • Sustainable suppliers 100%   • Accident frequency LTA1 0
        +30% vs. 2018                    0 tCO2 (Scope 2)               • Traceability of raw
     • Amount of carbon stored in                                         materials 100%
        products (t)
                                       Resource efficient production
       +30% vs. 2018
                                       • Utilisation of side-streams
                                         100%
     Safeguarding biodiversity         • Process water use per
     • Increasing the amount of          product ton (m 3/t)
       decayed wood: high                – 30% vs. 2018
       biodiversity stumps in          • Energy efficiency
                                         improvement
       90% of thinnings and
                                          >10% vs. 2018
       retention trees in all
       regeneration logging sites
55
External recognition and commitments

     Metsä Board has been included on the CDP              In 2018, Metsä Board received a     Metsä Board scored the highest      Metsä Board was awarded
     Water A List every year since 2015 and on the         rating of AAA (on a scale of        recognition level “Gold” in         “Prime” status in ISS ESG
     CDP Climate A List since 2016. In addition,           AAA-CCC) in the MSCI ESG            EcoVadis’ CSR ranking in 2018,      corporate responsibility rating in
     Metsä Board has scored A- in the CDP Forest           Ratings assessment.                 and is included in the top 1% of    May 2018.
     programme since 2015, and is included on the                                              suppliers assessed across all
                                                           Link to MSCI Terms and Conditions
     Supplier Engagement leader board in 2019 for                                              categories.
     its efforts to address climate change.

                                                           SUSTAINALYTICS                                                         SCIENCE BASED TARGETS

     Metsä Board as a part of Metsä Group is               Metsä Board has an overall          Metsä Board’s ESG                  Metsä Board is committed to
     committed to the UN Global Compact corporate          ESG score of 86/100 and is          performance was rated              Science Based Targets
     responsibility initiative and its principles in the   considered a Leader in              “Advanced” in Vigeo Eiris ESG      initiative to reduce its GHG
     areas of human rights, labour, environment and        Sustainalytics’ assessment in       assessment in July 2019.           emissions in line with the goal of
     anti-corruption. Metsä Board also supports the        May 2018.                                                              the Paris Agreement.
     UN’s Sustainable Development Goals, the SDGs.
56
Research and Development
Customers want better brand experiences with
     less environmental impacts

          Unique opportunities for            Enhanced and balanced
       sustainability and yield gains   visual properties that enable highly
      through lightweighting and raw     demanding printing and finishing
            material efficiency            techniques for premium looks

58
The role of packaging is to promote the brand and
                              protect the product – in a cost-effective way

                                                                                                    Metsä Board’s
                                                    Solid bleached board                            folding boxboard
                                                    (SBB)
     PROMOTION
                 Brightness

                                                                                 Folding boxboard
                                                                                 (FBB)

                                             Coated unbleached kraft
                                             (CUK)

                                White lined chipboard
                                (WLC)

                                                                           PROTECTION
                                                                             Stiffness
59
High-yield pulp makes the difference between folding
     boxboard and other grades …

                                           Three-layer structure of Folding Boxboard
     Light weight
     → better yield and sustainability
     High strength and bending stiffness
     → secure protection
     High brightness and smoothness
     → excellent printability
     Consistent quality
     → improved production efficiency

60
… and leave more trees standing

  SBS                                                       =
  (100% chemical pulp)
                         5 m3 of wood per tonne of pulp

  Metsä Board FBB
  (up to 70% BCTMP,                           =
  30% chemical pulp )
                         3.4 m3 of wood per tonne of pulp
Developing new paperboard and
     packaging solutions of the future
     A unique bioeconomy ecosystem in Äänekoski,
     Finland

     • Metsä Board to establish a new Paperboard and Packaging
       Excellence Centre, to be operational in 2020
        –   Combines packaging design and R&D excellence under the same roof
        –   Enables to organise packaging design workshops and innovation days
            together with customers and partners
     • We are testing and developing new types of paperboard in
       collaboration with Metsä Spring, Metsä Group’s innovation
       company
     • Pro Nemus Visitor Center provides a new way to learn about
       Metsä Group’s business operations, products and innovation
       activities
62
Our key product development focus areas
     LIGHTWEIGHTING                       BARRIER BOARDS
     • Improved BCTMP                     • Dispersion barriers
     • Microfibrillated cellulose (MFC)   • Bio-based raw materials
     • Strength additives

63
Lighter-weight paperboards: Better with Less
     The weights equal to a print job of 30 000 sheets on a standard size printing press

                                                                                     Metsä Board
                                                                                     lightweight paperboard

                                                                      Average FBB –
                                                                      Folding boxboard

                                                    SBB –
                                                    Solid bleached board

                            WLC –
                            White lined chipboard

64
Metsä Board enhances its leading
     position in premium lightweight
     paperboards
     In April 2019, we announced of our new, improved FBB
     portfolio, that answers to increasing demands for
     sustainability, product safety and brand promotion

       – Further opportunities for lightweighting
       – Enhanced visual properties
       – Industry-leading quality consistency
       – Improved supply security and availability

     Enabled by our improved high-yield BCTMP and full
     R&D focus on paperboard
65
New plastic-free barrier
     board for even more
     demanding end-uses
     Metsä Board has developed a new
     plastic-free eco-barrier paperboard for
     food and food service purposes

     Medium barrier for grease and moisture

     Can be recycled in paper or paperboard
     streams

                                  END-USES: Food service, fresh, dry and frozen food and
                                  other packaging end-uses that require barrier properties
66
KEY ADVANTAGES OF METSÄ BOARD’S NEW
5   ECO-BARRIER PAPERBOARD

     ✓ Plastic-free
     ✓ Easily recyclable
     ✓ Protective with medium barrier for grease and moisture
     ✓ Safe for direct food contact – no fluorochemicals or
       optical brighteners (OBA)
     ✓ Brightest OBA-free board on the market, with excellent
       printability on both sides
The new plastic-free eco-barrier is the next step
                           in Metsä Board’s barrier board development

                                HIGH                                                                        PE barrier boards
                           WVTR < 15 g/m²/d
     Moisture resistance

                              MEDIUM                                                    MetsäBoard
                           15 ≤ WVTR < 100                                             Prime FBB EB

                            MODERATE
                           100 ≤ WVTR < 250

                                                                  MetsäBoard
                               NONE             Paperboards
                           WVTR > 250 g/m²/d   without barrier   Prime FBB EB1

                                                   NONE            MODERATE                MEDIUM                 HIGH
                                                   < 10 min      10 min ≤ OGR < 6 h      6 h ≤ OGR < 72 h       OGR > 72 h

                                                                 Oil and grease resistance (flat sample)
68
Getting familiar with terminology:
     Barrier boards types

      Examples of materials used in coating
                                 BIODEGRADABLE                                             Note!
                                                                                     Biobased material
                                           PVA (polyvinyl alcohol)                           =
                PLA (polylactide): often

                                                                      NON-BIOBASED
                                           PBS (polybutylene                         Renewable material
                based on corn starch
                                           succinate)
     BIOBASED

                                                                                             ≠
                                                                                       Compostable
                                                                                             ≈
                                           PE: made from fossil raw
                Green PE: made from
                                           materials, used in                          Biodegradable
                biomaterials
                                           extrusion coating

                               NON-BIODEGRADABLE
69
Owners, management and
contact information
Market cap and ownership distribution
     Metsä Board shares are listed on Nasdaq Helsinki

     Market cap and foreign owners                                                      Ownership distribution
     30 September 2019                                                                  30 September 2019
     EUR million                                                            %            Foreign
      3 000                                                                 25           owners
                                                                                          13%
      2 500                                                                 20
      2 000                                                                                                         Metsäliitto
                                                                            15
      1 500                                                                                                        Cooperative
                                                                                 Domestic
                                                                                                                      45%
                                                                            10    private
      1 000                                                                      investors
                                                                            5      21%
        500

           0                                                                0
                   12/2014   12/2015   12/2016 12/2017   12/2018   9/2019

                                 Market cap, EUR million                                            Domestic
                                                                                                   institutional
                                 Share of foreign owners, %                                         investors
                                                                                                       21%

71
Metsä Board Corporate Management Team

             Mika Joukio                  Jussi Noponen                                                Sari Pajari
             CEO                          CFO                                                          SVP, Marketing and Sales

             Chairman of CMT since 2014   Member of CMT since 2016                                     Member of CMT since 2011
             MG employee since 1990       MG employee since 2000                                       MG employee since 2007
             Share ownership: 297,700     Share ownership: 73,000                                      Share ownership: 66,075

                                          Harri Pihlajaniemi
            Ari Kiviranta                 SVP, Production                                              Camilla Wikström
            SVP, Development                                                                           SVP, HR
                                          Member of CMT since 2017
            Member of CMT since 2014      MG employee in 2001-2004                                     Member of CMT since 2019
            MG employee since 1993        and since 2017                                               MG employee since 2001
            Share ownership: 50,000       Share ownership: no ownership                                Share ownership: 17,807

                                                                          Share ownerships are B-shares.
72                                                                        MG = Metsä Group
Contact information

     Katri Sundström
     Vice President, Investor relations
     Tel +358 10 462 0101
     katri.sundstrom@metsagroup.com

     Metsä Board Corporation
     P.O. Box 20
     02020 Metsä, Finland
     www.metsaboard.com

73
Disclaimer
     This presentation includes forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “may,” “plan,”
     “estimate,” “will,” “should,” “could,” “aim,” “target,” “might,” or, in each case, their negative, or any similar expressions
     identify certain of these forward-looking statements. Others can be identified from the context in which the statements are
     made. By their nature, forward-looking statements are subject to assumptions, risks and uncertainties. Although we
     believe that the expectations reflected in these forward-looking statements are reasonable, actual results may differ, even
     materially, from those expressed or implied by these forward-looking statements. We urge presentation participants not to
     place undue reliance on such statements.
     The information and views contained in this presentation are provided as at the date of this presentation and are subject to
     change without notice. Metsä Board does not undertake any obligation to publicly update or revise forward-looking
     statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
     Viewers should understand that this presentation does not constitute, and should not be construed as, an offer to buy or
     subscribe for Metsä Board’s securities anywhere in the world or an inducement to enter into any investment activity
     relating to the same. No part of this presentation should form the basis of, or be relied on in connection with, any contract
     or commitment or decision to invest in Metsä Board securities whatsoever. Potential investors are instructed to acquaint
     themselves with Metsä Board’s annual accounts, interim reports and stock exchange releases as well as other information
     published by Metsä Board to form a comprehensive picture of the company and its securities.
     Metsä Board publishes inside information according to Market Abuse Regulation (MAR) and rules of the Nasdaq Helsinki.

74
You can also read
NEXT SLIDES ... Cancel