Investor Presentation 4Q 2014 - Metsä Board · 4Q 2014 . Metsä Group 2 Metsä Board Content Investment highlights and update 3 Investment Highlights 4 Financial Targets and Dividend

Metsä Group Metsä Board

Investor Presentation

4Q 2014

5.2. 2015

Metsä Group Metsä Board 2

Content

Investment highlights and update 3 Investment Highlights 4 Financial Targets and Dividend 9 Strategy 21 Final Steps of Transformation 37 2014 Results & Outlook 48 Price Development 51 Investments Funding and debt information 54 Divestments 55 Funding and Debt 62 Credit Facilities 63 Rating History

General presentation 65 General Info 75 Operations 81 Deliveries 83 Sourcing 91 Sustainability 97 Owners 99 Market Positions


Key Investment Highlights of the Renewed Metsä Board

‒ Final steps in transformation to a paperboard company in process

‒ Strong growing core in high-quality paperboards

‒ European market leader in folding boxboard and global market leader in coated white top kraftliner

‒ Good growth outlook, especially in North America

‒ Best in class profitability and efficient operations

due to strong productivity improvements in recent years

‒ Good cash flow generation and solid balance sheet

‒ Technology leader in the core segments with well invested asset base

3


Financial Targets and Dividend


Financial Targets (renewed in February 2015)

‒ Return on Capital Employed (ROCE) a minimum of 12% from 2017 onwards

‒ Net gearing not to exceed 70%

Minimum ROCE 12%* Maximum net gearing 70%

* Excluding non-recurring items

184%

119%137%

82%95%

126%

99%90%84%83%

106%

72%

51%

70%83%

145%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Maximum level of 70%

13,5%

6,2%

2,8%

-0,5%

-5,6%

7,6%

3,4%4,8%

6,4%

9,1%

1,6%0,9%

2,1%

0,5%

10,2%7,6%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Minimum target of 12% from 2017

5


Main Priorities and Actions to Exceed ROCE 12 %

6

6

‒ Grow profitably the paperboard businesses globally

‒ Exit underperforming paper businesses

‒ Secure good price levels

‒ Further improve best in class product quality and supply chain

‒ Develop new products for existing and new end uses

‒ Continue productivity improvements and cost savings


Dividend Policy

- The Company remains committed to an attractive and competitive dividend

- Metsä Board's dividend policy is stable and rewarding to shareholders, and aims at paying a dividend of at

least 1/3 of the Company's EPS on average over the business cycle, nonetheless taking into account the

Company's net gearing target

7


0,50

1,09 1,13

1,85

0,46

0,30

-0,79

-1,58

-1,09

-0,83

0,52

0,210,260,37 0,38

0,51 0,51 0,51

0,25 0,00 0,00 0,00 0,090,190,23

-0,43 -0,25

-1,21

-0,59

0,09 0,12

0,120,120,140,06 0,06 0,060,00

3,0%3,4% 3,5%

7,2%

8,6%

6,9%

5,5%5,6%

4,1%3,3% 2,8%

2,1%

1,4%1,3%

0,0%

4,3%

0,0%0,0% 0,0%

-2

-1,5

-1

-0,5

0

0,5

1

1,5

2

2,5

3

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

€ p

er

sh

are

-8 %

-6 %

-4 %

-2 %

0 %

2 %

4 %

6 %

8 %

10 %

12 %

Div

ide

nd

yie

ld, %

Earnings per share Dividend per share Dividend yield

Dividend yield calculated from annual average B-share volume weighted price 2014 dividend is Board’s proposal to the AGM

Dividend Yield

8


Strategy


Consistent Strategy

10

‒ Paperboard is Metsä Board’s core business

‒ Focus on high-quality fresh forest fibre paperboards

‒ Reduced exposure in paper business

‒ Extensive fibre know-how and pulp self-sufficiency

‒ Continuous development towards Super Productivity


Packaging Materials Is about EUR 600 Billion Business Globally and It Is Growing Strong

Wood fibre

based

materials

36 %

Others

64 %

‒ Growing population

‒ Urbanization

‒ Environmental awareness

‒ Safety

Source: Smithers Pira

11

Highest growth in

paperboard packaging, accounting

for the largest share of the total


Metsä Board’s Paperboards Are Excellent Results of Successful Product Development

‒ Pure and safe

‒ Even over 30 % lighter in weight than other

paperboards

‒ Superior printing surface

12

Recycled

fibre based

cartonboard

Average FBB

SBB

(Solid

Bleache

d Board)

Metsä Board

FBB


Metsä Board’s High-Quality Paperboards Help the World’s

Leading Consumer Goods Companies to Succeed

‒ Increasing sales

‒ Improving sustainability

‒ Securing product safety

‒ Decreasing costs

13

Lower quality recycled fibre paperboards

Metsä Board’s grades’ global

demand growth 3-4 %/a

Recycled and fresh forest

fibre based cartonboards

and linerboards

High-quality fresh forest fibre

cartonboards

and linerboards


14

Profitability of Metsä Board’s Core Business Is the Best in Its Field

Operating result, excl. non-recurring items, % of sales


As the FBB Market Leader Metsä Board Continues Steady Organic

Growth and Responsible Pricing in the Domestic Markets in Europe

‒ Metsä Board continues to offer an ecological, safe and cost

competitive option for brand owners to replace plastics and

recycled fibre board

‒ Totally new business in food service and cup stock end uses

‒ Large and fast growing segment

‒ Best-in class customer service concept

‒ New advanced supply chain model

‒ Good technical service

‒ Healthy price levels a key priority for Metsä Board also in the future

15

Sources: Smithers Pira & Metsä Board

Total cartonboard market 7 million t/a

Demand growth 2 %/a

WLC 50%

FBB 35%

SBS 7%

CUK 8%


Metsä Board Continues Good Growth in the Highest Quality Segment in Asia. Timing not Good for Aggressive Growth

‒ Metsä Board is the cartonboard quality benchmark in Asia

‒ Responsible consumer goods companies promote good

packaging

‒ Sustainability

‒ Traceable raw materials

‒ Product safety

‒ Leading Chinese producers not in general targeting the

highest quality segment

‒ Fast demand growth in commodity segment

‒ Lack of high quality raw material

‒ Metsä Board continues to grow in Chinese high quality

segment and increases activities in other main Asian markets

16

Sources: Metsä Board & Risi

Total cartonboard market 15 million t/a

Demand growth 5%/a

WLC 73%

FBB 22%

Others 5%


Metsä Board Offers a Sustainable, Safe and Cost-Competitive Option for Consumer Goods Companies in North America

‒ Sustainability and safety increasingly important also

for North American brand owners

‒ Consumption mainly in conventional heavy cartonboards

‒ Four leading cartonboard producers dominate US market

and most of them are integrated to converting

‒ Product development has not been in focus

‒ No investments in new technology and capacity

‒ Difficult position for independent non-integrated converters

‒ Timing is perfect for Metsä Board to become a strong long-term

partner for local brand owners and converters

‒ Metsä Board’s FBB even over 30% lighter in weight

‒ Customer service ability as good as best local players’

17

Sources: Smithers Pira & Metsä Board

Total cartonboard market 6,5 million t/a

Demand growth 1 %/a

WLC 34%

SBS 34%

CUK 27%

FBB 5%


In Addition to Folding Boxboard Metsä Board Develops Strongly and Successfully Its Linerboard Business

‒ Successful transformation of Kemi mill to high end doublecoated segment

‒ Profitability to a totally new level

‒ Fully booked for several years

‒ Husum’s light weight fully bleached linerboards complete Metsä Board’s

offering enabling growth in totally new end uses

‒ Linerboard sales in North America doubled during the past 6 years

‒ USA today the biggest single market

‒ All leading corrugated box manufacturers as main customers

18

Metsä Board’s fresh forest fibre

linerboard deliveries in 2014

EMEA

63%

Americas

36%

Asia-Pacific 1%

Metsä Board’s fresh forest fibre linerboard

deliveries to North America, 1,000 tonnes

0

30

60

90

120

150

2009 2010 2011 2012 2013 2014

+100%


Threshold for New Producers to Enter High Quality

Paperboard Segment Is High

‒ Limited availability of high quality fibre

‒ Sustainably harvested high quality fresh forest fibres are a must

‒ Own state of art chemical, mechanical and BCTMP pulping capacity vital competitive factors

‒ Leading global consumer goods companies and corrugated box manufacturers

not willing to change paperboard suppliers easily in the high-quality segments

‒ High speed packaging lines very quality sensitive

‒ Requirements for uniform brand look and feel globally

‒ Sustainability and product safety aspects

‒ Skilled people and organizations a crucial success factor

‒ High-quality paperboard companies have traditions from several generations

19


New Innovative Light-Weight Paperboards Introduced in 2014 to Broaden Offering and Accelerate Growth

20

Carta Dedica Light weight cup stock and food service board

Carta Allura Luxury packaging board

Modo Northern Light Coated High quality liner for corrugated and microflute packaging


Final Steps of Transformation


Metsä Board Grows Its Paperboard Business, Plans to Fully Exit Paper Production and Considers a Rights Issue

‒ Major growth step in the folding boxboard business thanks to EUR 170 million

investment in a new production line and related infra at Husum mill in Sweden

‒ Linerboard volumes from Husum to be tripled from 2014 level to close to

300 000 tonnes fully from 2018

‒ Planned discontinuation of Husum mill’s paper production mostly by

the end of 2015 and fully by the end of 2017

‒ Elimination of losses of the Gohrsmühle mill in Germany

‒ Renewed management and reporting structure

‒ These final steps of transformation expected to be financed by current liquidity,

operating cash flow and potentially also by a rights issue in 1Q 2015

22


New Measures Finalize Metsä Board’s Successful Transformation

23

ROCE %

Market

growth

‒ 2006: New strategy

‒ 2007-2013: Numerous

divestments, closures and

restructuring measures

‒ 2015: Completion of the

transformation

The leading fresh forest

fibre paperboard

company in Europe

European

paper

Fresh

Forest Fibre

Paperboard


Investment in Husum the Most Cost-Competitive Alternative to Increase Capacity

‒ Metsä Board’s biggest mill integrate

‒ Skilled personnel

‒ Large two line pulp mill

‒ State of art coating technology

‒ Efficient power plant

‒ Own harbour

‒ Good existing other infrastructure

‒ Proximity to large forest areas


Husum Mill Will HaveTwo Production Lines and It Becomes a Leading Fresh Forest Fibre Paperboard Unit in Europe

25

‒ New folding boxboard machine, BM1

‒ EUR 170 million investment

‒ Production capacity approximately 400,000 t/a

‒ Start up in early 2016

‒ Full production capacity reached by end 2016

‒ Current PM8 to be converted to a linerboard machine, BM2

‒ Only minor investment needed

‒ Production capacity approximately 300,000 t/a

‒ Start up in spring 2015

‒ Husum’s linerboard sales run rate over 100,000 t/a at the moment

‒ Current state of art off-line coating machine serving both paperboard machines

‒ All in all, Husum’s fresh forest fibre paperboard capacity will be approximately 700,000 t/a


Husum’s New Paperboard Volumes to Be Sold Mainly Outside Europe

26

‒ Husum’s new folding boxboard volumes planned to be sold mainly to North America

and to the food service segment globally

‒ New linerboard volumes expected to be sold both in Europe and North America,

increasingly also to new applications e.g. in food packaging

‒ If the demand supply situation so requires in the coming years, Metsä Board has

possibilities to adjust its production accordingly


New Volumes to be Sold Mainly to North America, Where Metsä

Board’s Paperboard Volumes Increased Over 40% in 2014

27

Fresh forest fibre linerboard deliveries to

North America, 1,000 tonnes

0

30

60

90

120

150

180

2009 2010 2011 2012 2013 2014

FBB deliveries to North America, 1,000 tonnes

0

5

10

15

20

25

30

2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

FBB volume target in North America is

over 300 000 t/a in mid-term

Linerboard volume target in North

America is over 250 000 t/a in mid-term


Very Good Growth Potential in the New Food Service Segment

‒ Market growth 4 %/a

‒ Global market about 2,5 million tonnes

‒ The leading responsible brands are favoring more

and more paperboard in food service solutions

‒ Metsä Board’s FBB lighter in weight than typical

paperboards in food service end use

‒ Volume in 2014 over 20 000 tonnes. Mid-term target

over 150 000 t/a

28


Husum’s Entire Paper Production Is Planned to Be Discontinued

29

‒ Mostly at the end of 2015 and full exit by the end of 2017

‒ Paper production at two machines planned to be ceased by end 2015

‒ Combined paper capacity roughly 600,000 t/a

‒ Uncoated fine paper business reel production will be continued at the

BM2 until the linerboard sales volumes reach the full capacity


Metsä Board’s Pulp Self-Sufficiency Remains Strong

‒ Husum’s combined softwood and hardwood pulp capacity is approximately 750,000 t/a. After the planned

measures market pulp volumes are expected to be roughly 350,000 t/a

‒ In addition to chemical pulp produced at the site, the new folding boxboard production at Husum will use

majority of the BCTMP produced at Kaskinen mill in Finland

‒ Metsä Board’s associated company Metsä Fibre plans a bioproduct mill in Äänekoski, Finland with an

investment cost of approximately EUR 1.1 billion with net capacity increase of approximately 800,000 t/a

‒ Final investment decision planned for spring 2015. Operations would then commence during 2017

‒ Capital invested by Metsä Board would be maximum EUR 30 million (pro rata)

‒ All in all, Metsä Board’s pulp balance is expected to be approximately +500,000-600,000 t/a from 2018 onwards

‒ All market pulp is softwood chemical pulp

‒ Reserve to grow paperboard business further in the future while maintaining self-sufficiency in pulp

30


Gohrsmühle Mill’s Heavy Losses Targeted to Be Eliminated

‒ Main products cast coated and label papers

‒ Approximately 480 employees

‒ Estimated annual sales about EUR 85 million and annualized operating loss EUR 20 million

based on 2014 performance

‒ Main target is to divest the mill during the first half of 2015

‒ If the divestment will not materialize in the set time frame,

other measures to eliminate the heavy losses will be introduced

31


Significant Financial Improvements Thanks to Finalization of the Transformation

‒ Based on growth of paperboard business and discontinuation of Husum’s paper

production, Metsä Board’s annual sales is expected to remain rather stable

‒ Operating result excluding non-recurring items expected to improve by

approximately EUR 50 million compared to 2014

‒ Mostly in 2017 and fully in 2018

‒ Investment shutdown and accelerated depreciations in Husum is forecast to

impact operating result in 2015 negatively roughly by EUR 20 million

‒ Additionally, elimination of Gohrsmühle mill’s losses would lead to:

‒ Annual sales reduction of approximately EUR 85 million

‒ Operating result improvement of approximately EUR 20 million

32


Financing of the Planned Measures

‒ Partly financed through a rights issue of approximately

EUR 100 million, based on the Board of Directors’ authority

granted by the AGM

‒ Possible implementation in 1Q 2015

‒ Metsäliitto Cooperative is committed to a pro rata investment

of approximately EUR 43 million

‒ Other financing sources are current liquidity sources and

operating cash flow

‒ Metsä Board’s balance sheet continues to be strong also

after the new measures

‒ Investments

‒ Planned discontinuation of Husum’s paper production

‒ Potential negative cash impact due to the elimination of

Gohrsmühle mill’s losses

33

https://extranet.metsaliitto.com/en/Collaboration/aatos/Brand images/Metsa_2_0013_RGB_LOW.jpg


Management Structure Renewed to Enable Successful Implementation of the New Growth and Restructuring Measures

‒ Management structure changed from business area to a function based model

‒ Reporting segments are from 1Q 2015 onwards the following:

‒ Paperboard

‒ Non-core operations

‒ Paperboard segment includes folding boxboard, fresh forest fibre linerboard, wallpaper base and market pulp

businesses

‒ Non-core operations include Husum and Gohrsmühle mills’ paper businesses

‒ Reporting under Other operations as well as accounting for the 24.9 per cent ownership in Metsä Fibre Oy

will remain unchanged. The associated company result of Metsä Fibre will be allocated to Paperboard

‒ Financial statements 2014 will be based on the old reporting segments

‒ The restated historical figures will be released during February 2015

34


Metsä Board Strengthens Its Market Leadership

35

Note: Share of production capacity post-measures shown in percentages; Share of production capacity currently shown in parenthesis

Sources: Metsä Board, Pöyry Management Consulting Oy

Largest White Top Fresh Forest Fibre

Linerboard Producers in Europe Largest Folding Boxboard Producers in Europe

400

0 800 400 1,000 1,200 1,400 200 600

Holmen 7% (8%)

Current Post-measures

935 (35%)

Stora Enso

11% (13%)

Capacity: 1000 tons/a

1335 / 42%

+43%

Mayr-Melnhof

7% (8%)

IP

21% (25%)

120

0 700 600 500 400 300 200 100


700 / 33%

+41%


SCA

Smurfit Kappa 23% (25%)

Mondi

12% (13%)

BillerudKorsnäs

11% (12%)

14% (15%)

580 (29%)


Business Structure Improving Materially. Great Platform to Develop Business Further and Create Value for Customers and Owners

36

Sales distribution 2014

Paperboard 61%

Paper 24%

Market pulp 15%

Target sales distribution as of 1Q 2018*

Paperboard 80%

Market pulp 20%

*Indicative. Assumes that Metsä Fibre Äänekoski bioproduct plant is built.


2014 Results and Outlook


Highlights in 2014

38

‒ Profitability improved from previous year

‒ Cash flow was strong and net debt reduced clearly to EUR 427 million

‒ Paperboard delivery volume increased significantly and price levels were stable

‒ Metsä Board’s folding boxboard was successfully launched to North America

and to the global food service segment

‒ Production volumes and efficiencies improved

‒ Final steps in transformation to a paperboard company were introduced

‒ Mika Joukio started as the new CEO in October and the organization was renewed as of 1 Jan 2015


0,17

0,27

0

0,1

0,2

0,3

0,4

2013 2014

Metsä Board’s Profitability Improved in 2014

5878

0

25

50

75

100

2013 2014

6,4

9,1

0

3

6

9

12

2013 2014

2019 2008

0

1000

2000

3000

2013 2014

104

137

0

40

80

120

160

2013 2014

Sales Operating result, excl. non-

rec. items

Result before taxes, excl.

non-rec. items

m€ m€

m€

114117

0

40

80

120

160

2013 2014

Operating result

m€

Result before taxes

m€

ROCE, excl. non-

rec. items

%

Board of Directors is proposing to the AGM a dividend of EUR 0.12 per share for the financial year 2014

39

Earnigs per share, excl.

non-rec. items

€ per share

49

100

0

25

50

75

100

125

2013 2014


30

1929 28

6

2520

24 2636 35 37

0

10

20

30

40

50

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

545 522 532 509 535 503 514479502 501499494

0

200

400

600

800

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

-9

1710 9

1927

32

918

4

2021

-10

0

10

20

30

40

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Sales Operating result excl. non-rec. items

Result before taxes excl. non-rec. items

Operating Result in 4Q 2014 Roughly at Previous Quarter Level

40

EUR million EUR million

EUR million


‒ Folding boxboard deliveries decreased seasonally slightly in 4Q 2014

‒ Market prices were stable but stronger USD improved average price

‒ Good progress in North America and in the global food service segment

continued

‒ Result was weakened by decreased speciality paper deliveries partly

due to political and economic uncertainties in Ukraine and Russia

‒ No material price changes in folding boxboard 2015 annual contracts

compared to previous year

41

EBIT, excl. non-recurring items

Sales

No Material Change in Cartonboard Business Area’s

Profitability in 4Q 2014

EUR million

EUR million

1820

1817

20

1215

10

0

6

12

18

24

30

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

224230219214208220218

222

0

50

100

150

200

250

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14


Linerboard and Paper’s Result Improved Clearly in 4Q 2014

‒ Result was improved by higher fresh forest fibre linerboard average price due

to strengthened USD

‒ Linerboard deliveries decreased seasonally slightly in 4Q 2014

‒ Uncoated fine paper delivery volume increased and price level was

unchanged. Coated paper delivery volume and average price decreased

‒ Market pulp volumes were slightly lower but price increased due to USD

‒ Sales of CO2 rights had a positive result impact

‒ Linerboard deliveries are in 1Q 2015 expected to improve. No major price

changes in sight

‒ Paper deliveries are in 1Q forecast to increase but average price decrease

‒ No material market related changes foreseen in pulp business in 1Q

42

EBIT, excl non-recurring items

EUR million

EUR million

Sales

20

15

24

32

1516

7

20

0

6

12

18

24

30

36

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

271262

271 265288

269 267250

0

50

100

150

200

250

300

350

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14


EUR -30 Million in Net Non-Recurring Items Booked in 4Q 2014

Main items:

‒ EUR 26 million impairment of fixed assets in the Cartonboard business area related to

the loss-making Gohrsmühle mill in Germany

‒ EUR 13 million cost provision in the Linerboard and Paper business

area related to planned discontinuation of paper production at Husum

‒ EUR 7 million sales gain related to Niemenranta property in Tampere, Finland

43

Total non-recurring items in 2014 EBIT were EUR -20 million


Short-Term Profitability Outlook

44

‒ Metsä Board’s operating result excluding non-

recurring items is in the first quarter of 2015

expected to improve slightly compared to the last

quarter of 2014


Metsä Board’s Paperboard Deliveries Increased by 10 % in 2014

45

+ 7 %

169 176 185 185 189 192 197185 191 197

210 203

8085

93 8594 93

95

91

110108

118109

0

60

120

180

240

300

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Fresh forest fibre linerboard

Folding boxboard

+ 10 % 1000 tonnes


46

‒ USD and SEK vs. Euro has moved to favourable direction from Metsä Board’s viewpoint in 2H 2014

and in early 2015

‒ Hedging of the main foreign currency flows is 5-7 months

‒ Positive net EBIT impact after hedges in 2014 was EUR 15 million vs. 2013

‒ Incremental positive impact expected in 2015

‒ Annual unhedged EBIT sensitivity of 10 % change vs. euro

‒ EUR 45 million in USD

‒ EUR 20 million in GBP

‒ Reversed EUR 30 million SEK

‒ Segment numbers reflect exchange rate changes rapidly

but hedge accounting result in Other operations balance the impact

Exchange Rates Changes Favourable for Metsä Board


Key Priorities in 2015

‒ Grow profitably the paperboard businesses globally

‒ Successful implementation of the investment projects in Husum

‒ Secure good price levels

‒ Further improve best in class product quality and supply chain

‒ Develop new products for existing and new end uses

‒ Elimination of the losses from Gohrsmühle mill

‒ Continue productivity improvements and cost savings

47

6,4

4,8

3,4

7,6

-5,6

9,1

-6

-3

0

3

6

9

12

15

2009 2010 2011 2012 2013 2014

Target min. 12 % from 2017 onwards

ROCE, excl. non-recurring items

%


EUR / tonne

Folding Boxboard Market Price in Europe

2004 – 2014

48

Source: Pöyry Management Consulting

800

900

1000

1100

2009 2010 2011 2012 2013 2014


500

600

700

800

900

2009 2010 2011 2012 2013 2014

49

Uncoated White-Top Kraftliner Market Price in Europe

2009 – 2014

Source: Foex

EUR / tonne


EUR / tonne

Paper and Pulp Market Price in Europe

1998 – 2014

Coated fine paper (100 g)

Uncoated fine paper (B-copy, 80 g)

Softwood pulp NBSK

Coated magazine paper LWC (60g)

Source: Foex, Reuters

EUR/USD

EUR/USD

400

500

600

700

800

900

1000

1100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0,8

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7

50


Investments


170

44

6766

95

7372

128

259

428

0

100

200

300

400

500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ion

€Capital Investments about 170 m€ in 2015

Indicative level for 2015

52


Funding and Debt Information

53


Significant Divestments – EUR 3.7 billion in assets divested since 2001

2004 Metsä Tissue 570

2002 Papierfabrik Albbruck 235

2001 MD Papier 300

2001 Noviant (19%) 41

3,679

Year Divestiture Enterprise Value

m€

2005 Savon Sellu 20

2005 Forestia (95%) 163

2005 Botnia (8%) 164

2007 Botnia (9%) 240

2007 Folding carton plants 60

2007 Map Merchant Group 382

2008 New Thames mill 82**

2008 100 000 B2 shares in PVO 80

2008 Graphic Papers 750

* Cash portion

**Incl. pension liabilities

2009 Metsä-Botnia’s Uruguayn operations 300* 2011 Hallein 34

54

2012 0.5 % stake in PVO 64 2012 7.3 % stake in Metsä Fibre 138 2013 Alizay property and other assets 22 2014 Lielahti real estate 32


Net Debt Reduced to EUR 427 Million Thanks to Strong Cash Flow

‒ Cash flow from operations EUR 83 million in 4Q and

EUR 210 million in 2014 (EUR 127 million in 2013)

‒ Gross debt EUR 684 million and net debt EUR 427 million at end 2014

( EUR 597 million at end 2013)

‒ Net gearing 51 % (70 %), equity ratio 39 % (41 %) and average

interest rate 4,0 % (4,8 %) at the end of 2014

‒ Net debt to EBITDA dropped to below 2

‒ Strong liquidity position

‒ Moody’s raised Metsä Board’s credit rating to B1 in 4Q 2014

55

Net Debt / EBITDA

Net Debt

1,8

2,7

0

1

2

3

4

5

2010 2011 2012 2013 2014

EUR million

427

827

0

250

500

750

1000

2010 2011 2012 2013 2014


Loans and Interest Rate

At the end of 2014

‒ Average maturity of long term loans 3,5 years

‒ Average interest rate of loans (including derivatives) 4,0 %

‒ Interest rate maturity of loans (including derivatives) 27 months

‒ Of the loans about 23 per cent was subject to variable interest rates and 77 per cent to

fixed interest rates

56


Diversified Funding Sources

57

Long-Term Interest Bearing Liabilities 31.12. 2014

33 %

8 %

3 %

29 %

27 %

Bonds

Pension premium loans

Loans from financial institutions

Finance leases

Other interest bearing liabilities

Total 681 m€


Interest Bearing Net Liabilities 31.12. 2014

‒ Long-term 681

‒ Short-term 4

Total interest bearing liabilities 684

‒ Liquidity and interest bearing receivables 257

Interest bearing net liabilities 427

58

m€


Well Balanced Maturity Schedule

100

37

83

181

254

25

0 1

100

46

0

50

100

150

200

250

300

2015 2016 2017 2018 2019 2020 2021 >2021

Long-term interest bearing liabilities

Committed undrawn credit facilities

m€

59

Long-term Interest Bearing Liabilities and Committed Undrawn Credit Facilities 31.12.2014


Balance Sheet Ratios

60

777

827

783

625597

427

17,7

2,7

4,4

3,42,9

1,8

0

100

200

300

400

500

600

700

800

900

2009 2010 2011 2012 2013 2014

0

2

4

6

8

10

12

14

16

18

20

Net Debt and Net Debt/EBITDA* Net Gearing

51

84 83

106

7270

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014

Net debt,

EUR million Net debt/EBITDA

*Excluding non-recurring items

%

Target max. 70 %


39,2

33,3 32,4

38,740,7 41,0 39,8 39,8

0

5

10

15

20

25

30

35

40

45

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

51

57

656970

7574

69

0

10

20

30

40

50

60

70

80

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Quarterly Balance Sheet Ratios

Equity Ratio Net gearing % %

61


Debt Programs 31.12.2014

62

The following table sets forth the significant debt securities issued and outstanding of Metsä Board as at Dec. 31, 2014

Average

Long-term borrowings Total amount Outstanding Interest Rate *) Maturity

EUR 225 million Bond Issue 2014 EUR 225 EUR 225 4,5 % 2019

Syndicated credit facility 2014 EUR 250 EUR 150 4,0 % 2018

EUR 105 million bilateral loans EUR 105 EUR 105 3,5 % 2015-2017

EUR 23 million finance leases EUR 23 EUR 23 2,2 % 2015-2020

EUR 229 million pension loans EUR 229 EUR 184 3,8 % 2015–2020

*) The average interest rate take into account outstanding interest rate swaps and amortised arrangement fees.

Average interest rate of all Metsä Board interest bearing liabilities including interest rate derivatives per 31.12.2014 is 4,0 %.

The following table sets forth Metsä Board´s principal long-term liquidity reserves as at December 31, 2014:

Average

Liquidity reserves Total amount Outstanding Interest Rate *) Maturity

(EUR in millions)

Revolving Credit Facility 2014 EUR 100 EUR 0 – 2018

Pension loan facilities EUR 229 EUR 184 3,8 % -

Short-term funding programmes

Metsä Group internal short-term limit EUR 150 EUR 0 – 0-12 months

Metsä Group Treasury funding programmes:

EUR 150 million domestic CP-program EUR 150 EUR 0 – 0-12 months

(currency in millions)


Ratings’ History

2000 S&P: Short term ratings lowered to A3, Long term ratings placed to credit watch negative Moody’s: Long and short term ratings outlook changed from stable to negative

2001 S&P: Long term ratings lowered to BBB-, stable outlook Moody’s: Long and short term ratings lowered to Baa3/P3, negative outlook

2003 S&P: Downgrade to BB+, stable outlook Moody’s: Downgrade to Ba1, negative outlook

2004 S&P: Outlook changed from stable to negative, ratings affirmed Moody’s: Downgrade to Ba2, stable outlook

2005 S&P: Downgrade to BB, stable outlook Moody’s: Outlook changed from stable to negative, ratings affirmed

2006 S&P: Downgrade to BB-, negative outlook Moody’s: Downgrade to Ba3, negative outlook Moody’s: Downgrade to B2, negative outlook S&P: Downgrade to B+, negative outlook

2007 Moody’s: Downgrade to B3, negative outlook S&P: Downgrade to B, negative outlook S&P: Downgrade to B-, stable outlook

2008 S&P: Outlook to negative

2009 S&P: Downgrade to CCC+, negative outlook Moody’s: Downgrade to Caa1, outlook negative

2010 S&P: Outlook to stable Moody’s: Outlook to stable S&P: Upgrade to B-, stable outlook Moody’s: Upgrade to B3, outlook to positive

2011 S&P: Outlook to positive S&P: Outlook to stable Moody’s: Outlook to stable

2012 Moody’s: Outlook to positive

2013 S&P: Outlook to positive Moody’s: Upgrade to B2, outlook stable S&P: Upgrade to B, outlook stable Moody’s: Outlook to positive

2014 S&P: Outlook to positive Moody’s: Upgrade to B1, outlook positive

63


Positive Rating Development

64

Moody’s

Standard & Poor’s

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

BB+ | Ba1

BB | Ba2

BB- | Ba3

B+ | B1

B | B2

B- | B3

CCC+ | Caa1

CCC | Caa2

Positive

Positive


General Info


Metsä Board in Brief

‒ Annual sales about EUR 2.0 billion

‒ The leading European fresh forest fibre paperboard company

‒ Also a market pulp supplier

‒ Valuable holdings in Metsä Fibre and Pohjolan Voima

‒ Main customers are brand owners, printers, corrugated packaging manufacturers and merchants

‒ Global sales and customer service network in 70 countries and nine production units in Finland, Sweden and Germany

‒ Listed on the NASDAQ OMX Helsinki Ltd and a part of Metsä Group, one of the largest forest industry groups in Europe

66


67

Linerboards from Kemi

Folding Boxboard

Linerboards from Husum

Metsä Board Is Able to Offer a Wide Coverage of High-Quality Paperboards for Consumer Goods Companies and Converters


Metsä Board’s Main Customers

Brand owners

Printers and

converters

Advertising and

design agencies Office paper resellers

Merchants

68


Metsä Board’s Renewed Fresh Forest Fibre Based Paperboard Portfolio Fits Well to Consumer Goods Companies’ Demand

69

Consumer Goods Companies

Fresh forest fibre linerboard

Graphical

end-uses

Carton printers Merchants

Corrugated box manufacturers

Folding boxboard


17 %

32 %

12 %

9 %

12 %

6 %

9 %3 %

Paper Pulp

Paperboard Packaging

Tissue Mechanical Forest Products

Merchanting Chemicals

61 %

24 %

15 %

Focus on Core Businesses

1995 Sales

€2.3 billion

2014 Sales

€2.0 billion

8 Businesses 3 Businesses

70


Acquisitions

Divestments

Biberist Paper Mill

Simpele

Mill

UK Paper

Modo Paper

Zanders

Chemicals

Business

Botnia

Wood

Corrugated

Packaging MD Papier Metsä

Tissue

Albbruck

Metsä Board Restructuring Story

Savon

Sellu

Forestia

Kemiart

Liners (53 %)

8% in

Botnia

PSM

9% in

Botnia

Carton

plants

Map

100 000

B2 shares

in PVO

New

Thames MB

Uruguay

Graphic

Papers

Part of

Reflex

Hallein

mill

1997 2000 1998 1999 2001 2002 2003 2004 2005 2006 2007 2009 2008 2010 2011

71

Rest of

Reflex

0.5% in

PVO

2012

7.3 % in Metsä Fibre

2013 2014

Alizay

mill Lielahti

real estate


Annual Sales Development

200820192108

24852605

2432

3236

4440

56245241

5460

6044

65646923

5898

33193014

2313

4044

0

1000

2000

3000

4000

5000

6000

7000

8000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

EUR, million

72


EBITDA Development

73

EBITDA excl. non-recurring items

236

208

186179

305

44

0

60

120

180

240

300

2009 2010 2011 2012 2013 2014

EUR million


74

Metsä Board Corporate Management Team as of 1 January 2015

CEO

Mika Joukio

Marketing and Sales

Seppo Puotinen

Business Development

Sari Pajari

Production and Technology

Ari Kiviranta

Finance g

Markus Holm

Human Resources

Susanna Tainio


Operations


0

500

1 000

1 500

2 000

2 500

Paper Board Pulp and BCTMP

1000 tons/a

Production Capacity

76

Currently After Implementation of planned measures

0

500

1 000

1 500

2 000

2 500

Wallpaper base Board Pulp and BCTMP

1000 tons/a


Production Locations

Husum

Gohrsmühle

Äänekoski Simpele

Joutseno

Kemi

Tako Kyro

Kaskinen

77

Paperboard mills

‒ Husum

‒ Kemi

‒ Kyro

‒ Tako

‒ Simpele

‒ Äänekoski

Pulp mills

‒ Husum

‒ Joutseno

‒ Kaskinen

Speciality paper mills

‒ Kyro

‒ Gohrsmühle


Paperboard and Paper Capacity in 2015

(1000 t/a)

78

Paperboard and paper mills

Country Machines Folding White Top Uncoated Speciality Coated Total

Boxboard Kraftliner Fine Paper Paper Paper

Tampere (Tako) Finland 2 205 205

Kyröskoski (Kyro) Finland 2 190 105 295

Äänekoski Finland 1 240 240

Simpele Finland 1 300 300

Kemi Finland 1 410 410

Husum Sweden 3 170 400 240 810

Bergisch Gladbach (Gohrsmühle) Germany 2 50 50

Total 12 935 580 400 155 240 2310


Pulp Capacity in 2015

(1000 t/a)

79

Pulp mills

Country Chemical BCTMP

Pulp Total

Husum Sweden 750 750

Joutseno Finland 310 290

Kaskinen Finland 310 300

Total 750 620 1340

Metsä Fibre *

Country Chemical

Pulp Total

Äänekoski Finland 530 530

Kemi Finland 590 590

Rauma Finland 650 650

Joutseno Finland 690 690

Total 2460 2460

* Metsä Board's share is 24.9% of the capacity


Personnel Development

3111311632794070

45384903

6546

9508

1412515154

16490

2107022237

17351

20372

0

5000

10000

15000

20000

25000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

80


Deliveries


Metsä Board’s Products Are Sold Globally. Europe Is the Domestic Market. Importance of North America Is Growing

82

Fresh Forest Fibre Linerboard Folding Boxboard

27 %

14 %

13 %

46 %

Western Europe

Eastern Europe

Americas

Asia and Pacific

6 %

57 %

1 %

36 %

11 %

85 %

4 %

Uncoated Fine Paper


Sourcing


Personnel

15 %

Other fixed

17 %Delivery costs

14 %

Wood

22 %

Chemicals,

pigments and

fillers

15 %

Other

variables

3 %Energy

14 %

Cost Structure 2013* (total annual costs in industrial operations ~ EUR 1.6 Billion)

Fixed costs

Variable costs

* Percentage of annual costs in industrial operations

84


Electricity Sourcing 2013 (total 2,767 GWh)

Through PVO

shareholding

29 %

Outsourced

generation

2 %

Own generation

20 %

Purchased

energy

49 %

85


Fuels Used 2013 (total 13.1 TWh)

Wood-based

58 %

Nuclear power

22 %

Natural gas

6 %

Oil

2 %Peat

2 %Coal

5 %

Hydro

5 %

86


Wood Sourcing by Country in 2013

1 000 m3

Sweden 1 789

Finland 1 191

Baltic countries 1 074

Russia 764

Total 4 818

87


Development of Softwood Pulpwood Cost at Mill, Wood for Chemical Pulping

1980 – 1Q 2014

Source: Pöyry Management Consulting Oy

88

EUR/m³sob


Development of Softwood Pulpwood Cost at Mill, Wood for Mechanical Pulping

1980 – 1Q 2014


89

EUR/m³sob


Development of Hardwood Pulpwood Cost at Mill, Wood for Chemical Pulping

1980 – 1Q 2014

Source: Pöyry Source: Pöyry Management Consulting Oy

90

EUR/m³sob


Sustainability


WE OFFER SUSTAINABLE CHOICES

Product and services

• Sustainable products, services and

innovations

• Product safety

THE SMALLER THE ENVIRONMENTAL IMPACT

THE BETTER

Environmental efficiency

• Energy & climate

• Water

• Material efficiency

• Environmental risk management

WE BRING FOREST TO YOU

Supply chain and raw materials

• Sustainable forest management &

nature values

• Sustainable supply chain

• Partnership with suppliers and

forest owners

WE CREATE WELL-BEING

Internal and external stakeholders

• Human rights

• Ethical business practices

• Responsible employer

• Well-being for local communities

Sustainability Is at The Heart of Our Operations

92


93

SUSTAINABILITY

TARGETS

SUPPLY CHAIN

ETHICAL

BUSINESS PRACTICES WELL-BEING

ENERGY AND

CLIMATE

CO2 -30%

100%

COVERAGE OF

CODE OF CONDUCT

TRAINING

100%

COVERAGE OF

SUPPLIER CODE OF CONDUCT

LOST-TIME

ACCIDENTS 0

SHARE OF

CERTIFIED WOOD

ABOVE 80%

WOOD

SICKNESS

ABSENTEEISM

BELOW 3%

ENERGY

EFFICIENCY +10%


- The amount of certified wood was 65%

- The EU Timber Regulation came into force in 2013.

Metsä Board paperboards are in compliance with the

regulation

- A new supply chain management target was

launched: to audit 100% of risk rated key material

suppliers against sustainability criteria by end 2015

92 % of all Metsä Board purchases, excluding wood,

come from countries where we have own production

Raw Materials and Supply Chain Management in 2013

94

Metsä Board’s purchases by country %

Exluding wood supply


- Share of wood based biofuels increased to 63% of total fuels

- Energy efficiency has been improved by 7% from 2009

- Process water use per product tonne has decreased by

15% from 2010

- 97% of the water we use is surface water

- Total reduction of fossile CO2 emissions has been 35 %

since 2009

Resource and Environmental Efficiency in 2013

95

Metsä Board Greenhouse gas effect

(CO2 equivalent, 1,000 tonnes)


- In 2013, Metsä Board’s lost-time accident frequency rate was

12.2 (13.2 in 2012) and sickness absenteeism rate 3.9 (3.9)

- Metsä Board aims to improve its lost-time accident frequency

rate by 10 per cent each year. The long-term target is zero

- The target is to keep the sickness absenteeism rate at the best

European level and below 3 per cent at all times

Well-Being and Accident Rate Development in 2013

96

Sickness Absenteeism Development


Owners

97


Ownership Structure 31.12.2014

Shares Votes

Source: Euroland 98


Market Position


Metsä Board Strengthens Its Market Leadership

100

Note: Share of production capacity post-measures shown in percentages; Share of production capacity currently shown in parenthesis

Sources: Metsä Board, Pöyry Management Consulting Oy

Largest White Top Fresh Forest Fibre

Linerboard Producers in Europe Largest Folding Boxboard Producers in Europe

400

0 800 400 1,000 1,200 1,400 200 600

Holmen 7% (8%)


935 (35%)

Stora Enso

11% (13%)


1335 / 42%

+43%

Mayr-Melnhof

7% (8%)

IP

21% (25%)

120

0 700 600 500 400 300 200 100


700 / 33%

+41%


SCA

Smurfit Kappa 23% (25%)

Mondi

12% (13%)

BillerudKorsnäs

11% (12%)

14% (15%)

580 (29%)


0 100 200 300 400 500 600 700 800 900 1000

Others

Cascades

Holmen

IP

Mayr-Melnhof

Stora Enso

Metsä Board

Folding Boxboard Capacities in Europe BIG-5 = 89% of total

Capacity: tons/year (thousand)

35%

25%

13%

8%

8%

7%

5%


101


0 100 200 300 400 500 600 700

Others

SCA

BillerudKorsnäs

Mondi

Smurfit Kappa

Metsä Board

White Fresh Forest Fibre Linerboard Capacities in Europe BIG-5 = 94% of total


29%

25%

15%

13%

12%

7%

Source: Metsä Board, Pöyry Management Consulting Oy

102


0 500 1000 1500 2000 2500 3000 3500

Others

Double A

Arctic Paper

Metsä Board

UPM

International Paper

Stora Enso

Mondi

Portucel

Uncoated Fine Paper Capacities in Europe BIG-5 = 60% of total

15%

13%

13%

11%

8%

4%

4%

4%

29%


Source: Pöyry Management Consulting Oy, Metsä Board

103


104

Make the most of Metsä Board

Thank You!

www.metsaboard.com

Juha Laine Head of IR

+358 10 4654335

[email protected]

http://www.metsaboard.com/

http://www.metsaboard.com/

mailto:[email protected]

Documents

Investor Presentation 4Q 2014 - Metsä Board · 4Q 2014 . Metsä Group 2 Metsä Board Content Investment highlights and update 3 Investment Highlights 4 Financial Targets and Dividend