Metsä Board Financial statements review 2015

Metsä Board2015 Financial statements review

• Paperboard delivery volumes increased by 12% compared to 2014

• Operating profit improved 32%

• Strong operating cash flow and balance sheet

• Board proposes to AGM a dividend of 0,17 EUR / share

• Husum investment programme proceeded as planned

• Investment decision on own extrusion line

• Divestment of Gohrsmühle mill and exit from paper production

Q4 20152

Highlights in 2015

Strong financial performance in 2015

2015 2014 Change

Sales EUR million 2,008 2,008 ---

EBITDA, excl. NRIs EUR million 283 236 20%

% of sales % 14,1 11,8 ↑

Operating result, excl. NRIs EUR million 180 137 31%

% of sales % 9,0 6,8 ↑

Result before taxes, excl. NRIs EUR million 150 100 50%

Earnings per share EUR 0,39 0,20 95%

ROCE, excl. NRIs % 11,3 9,1 ↑

Gross investments EUR million 178 44

Cash flow from operations EUR million 247 198 25%

Q4 20153

Continuous improvement in profitability

3,4

4,8

6,4

9,1

11,3

0

2

4

6

8

10

12

2011 2012 2013 2014 2015

%

2,4

3,6

5,2

6,8

9,0

0

2

4

6

8

10

2011 2012 2013 2014 2015

%Q4 20154

ROCE-%, excl. non-recurring itemsEBIT-%, excl. non-recurring items

Target over 12% from 2017

Operating result in Q4 weakened as expected,

sales down due to the decreased paper deliveries

Q4 20155

29 36 28 35 37 43 47 55 35

6%7%

6%7%

7%8%

9%

11%

8%

0%

5%

10%

15%

0

10

20

30

40

50

Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q415

Operating result*EUR million and % of sales

18 21 20 27 32 32 40 48 30

4% 4% 4%5%

6% 6%

8%

10%

7%

0%

5%

10%

15%

0

10

20

30

40

50

Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Pre-tax result* EUR million and % of sales

479 501 494 514 499 526 522 498 462200

300

400

500

600

Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

SalesEUR million

*) excluding non-recurring items

Paperboard deliveries declined slightly in Q4/2015Growth in 2015 vs. 2014 was 12%

Q4 20156

189 192 197 185 191 197 210 203 204 213 224 224

94 93 9591

112 110120

111130

141 137 131

0

60

120

180

240

300

360

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Folding boxboard Fresh forest fibre linerboard

1,000 tonnes

Note! Figures exclude wallpaper deliveries

Paperboard segment in Q4/2015

Q4 20157

Operating result, excl. non-recurring itemsSales

EU

R m

illio

n

EU

R m

illio

n

5161 60 65

51

14%16% 15% 16%

13%

-2%

1%

4%

7%

10%

13%

16%

0

20

40

60

Q4/14 Q1/15 Q2/15 Q3/15 Q4/150

100

200

300

400

Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Q4/2015 (Q3/2015)

• Delivery volumes decreased due to seasonality and were 365 000 tons (373 000)

• Negative impact from the investment related integrate shutdown in Husum was EUR 20 million, of which

slightly less than half was allocated to Paperboard segment

• Price levels remained stable. Metsä Board’s FBB price increase announcement in Europe

came into effect on 1 December.

Operating result, M€

Operating result, M€

EBIT-%

Non-core operations segment in Q4/2015

Q4 20158

Operating result, excl. non-recurring itemsSales

EU

R m

illio

n

EU

R m

illio

n

0

50

100

150

Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

-1,8 -3,2 -3,4 -1,3 -8,4

-1% -3%

-3%

-2%

-17%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

-18

-14

-10

-6

-2

2

Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Q4/2015 (Q3/2015)

• Significant decrease in paper delivery volumes

• Negative impact from the investment related integrate shutdown in Husum was EUR 20 million,

of which slightly over a half was allocated to Non-core operations segment

• Production of uncoated paper sheets ended in Husum

Operating result, M€

Operating result, M€

EBIT-%

FX exposure by currencyAnnual gross amount EUR 1.1 billion

62 %26 %

9 %3 % USD

SEK

GBP

Othercurrencies

10 % strengthening of foreign currency vs. EUR

will have an impact on Metsä Board’s annual EBIT of

Currency 2015 2016 (est.)

USD, $ EUR +45 million EUR +60 million

GBP, £ EUR +20 million EUR +10 million

Swedish krona EUR -30 million EUR -30 million

9

Annual FX sensitivities to Group EBIT

• FX rate changes in the main foreign currencies were favourable to Metsä Board in 2015

• Hedge accounting costs in 2015 were EUR 22 million (10)

• Hedging duration of the main foreign currency flows is 3–6 months

• Segment figures reflect exchange rate changes rapidly but hedge accounting result in Other operations

balance the impact

Q4 2015

FX exposure and sensitivities

Strong balance sheet

Equity ratio, %

27%

33%

41%39%

47%

0%

10%

20%

30%

40%

50%

2011 2010 2013 2014 2015

106%

73% 70%

51%

32%

0%

20%

40%

60%

80%

100%

120%

2011 2012 2013 2014 2015

Q4 201510

Net gearing, %

783 625 597 427 333

4,4

3,4

2,9

1,8

1,2

0

1

2

3

4

5

0

200

400

600

800

1000

2011 2012 2013 2014 2015

Net debt, EUR million

Net debt/EBITDA

Net debt, EUR million and Net debt/EBITDA

Target 70%

Capital expenditure

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016E

Capex Growth capex Depreciation

• Annual capex excluding the growth capex

is EUR 40–60 million

• Main growth capexes in 2015–2016 :

– Husum investment:

EUR 170 million (in 2015: 132 M€)

– Extrusion line:

EUR 38 million (in 2016: 23M€)

– Metsä Fibre’s bioproduct mill:

EUR 25 million* (2016)

Q4 201511

EUR million

*) investment in equity

Q4 201512

Investment programme in Husum

is completed

• The new FBB production line is in the start-up phase

– Delay in the start-up phase will have a slight negative impact on the

operating result in Q1/2016

– Integrate shutdown had approximately EUR -20 million impact on

Q4/2015 operating result

• Targeted product quality is expected to be reached by Q3/2016

according to the original plan

Folding boxboard production (BM1)

• Full production capacity (400,000 t/a)

reached by the end of 2016

• Deliveries mainly to Americas and

Food service globally – expected volume in

2016 at least 200,000 tonnes

Linerboard production (BM2)

• Capacity 300,000 t/a

• Deliveries to Europe and Americas

• Remaining uncoated paper*

production to linerboard production

by end of 2017

*) current run-rate 100,000 tn/a

Investment programme in Husum mill, Sweden

Annual EBIT impact EUR +50 million

– Roughly one third will materialise in 2016, full impact in 2018

Gohrsmühle divestment

Annual EBIT impact EUR +20 million

– Roughly half materialised in 2015, full impact in 2016

– Reduces annual sales by EUR 90 million

Q4 201513

Financial impacts of transformation

Q4 201514

Outlook for Q1/2016

• Total delivery volumes in paperboard will grow

compared to Q4/2015

• Average price level in FBB is expected to decline due

to the start-up volumes from the new FBB production

line

• The delay in the start-up phase of the new FBB

production line will have a negative impact on pulp and

paperboard production volumes

• Total production costs are expected to remain stable

Metsä Board’s operating result excluding

non-recurring items in Q1/2016 is expected

to remain roughly at the same level as in Q4/2015

Q4 201515

Profit guidance for Q1/2016

The Board proposes a dividend of 0,17 EUR / share

which equals 44% of EPS

0,06

0,09

0,12

0,17

0

0,02

0,04

0,06

0,08

0,1

0,12

0,14

0,16

0,18

0,2

2012 2013 2014 2015

2015 CMD16

• Metsä Board’s dividend payout target is at least 1/3 of EPS

• Average pay-out ratio during 2012–2014 has been 40%

• Solid financial performance in 2015: Improved profitability,

strong operating cash flow and balance sheet

• Metsä Board’s paperboard deliveries grew by 12%

compared to 2014

• Healthy demand in fresh forest fibre paperboards

expected to continue

• Metsä Board’s new FBB production line is in the start-up

phase in Husum. The target is to sell 200,000 tonnes of

new FBB to Americas and food service globally in 2016

• Transformation process to pure paperboard company is

completed

Q4 201517

Summary

Appendix

Other operations segment in Q4/2015

Q4 201519

-2 -6 -6 -12 -14 -9 -9 -8

-15

-12

-9

-6

-3

0

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Other operations segment:

Operating result, excl. non-recurring itemsEUR million

• Other operations segment include costs which

are not allocated to units, e.g. head office costs

and hedge accounting

• Cost base of these is roughly EUR 5 million per

quarter

• Result fluctuation is mainly caused by hedge

accounting, which had a total negative impact of

EUR 22 million in 2015 (-10)

EBITDA development

180 185208

236

283

7,2 %

8,8 %

10,3 %

11,8 %

14,1 %

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

50

100

150

200

250

300

2011 2012 2013 2014 2015

EU

R m

illio

n

Q4 201520

EBITDA, excl. non-recurring items

Financial costs are declining steadily

47 56 39 323,0

3,5

4,0

4,5

5,0

5,5

0

20

40

60

2012 2013 2014 2015

Net financial costs, EUR million

Average interest rate, %

• Net financial costs in FY2015 totalled EUR 32

million (2014: 39)

• Net financial costs in Q4/2015 totalled EUR

4.7 million (Q3/15: 7.1)

• Declining costs due to the lower interest rates

and credit margins as well as decline in IB

debt

• Average interest rate in IB debt in

FY2015 was 3.8% (4.0)

Q4 201521

Net financial costs and average interest rateEUR %

Strong cash flow from operations

-19

92

51 74 33 56 91 66

-24

78

46 56 9 8 45 8

19

114

157

198

250

214

254 245

-37

57

110155

188

119 118

70

-100

-50

0

50

100

150

200

250

300

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Cash flow from operations, quarterly Free cash flow, quarterly

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

Q4 201522

EUR million

Diversified funding sources, strong liquidity

34 %

39 %

24 %

3%Bonds

Loans from financialinstitutions

Pension loans

Finance leases andother loans

Q4 201523

Debt structureTotal EUR 659 million

31 December 2015

67 %

20 %

13 % Liquid assets andinvestments

Revolving creditfacility

Undrawn pensionloan

Available liquidityTotal EUR 490 million

31 December 2015

Average interest rate of IB at the end of 2015 was 3.8% and average repayment time of long-term borrowing 2.6 years.

Shares, % (total no. of shares 355,512,746)

24

Votes, % (total no. of votes 1,037,530,115)

16,8

2,2

19,8

40,2

4,5

5,311,2

Households

Non-profitorganisations

Foreigners*

MetsäliittoCooperative

Other companies

Finance andinsurance companies

Public sectororganisations

10,0 4,1

7,0

60,9

1,8

1,9 14,4

Households

Non-profitorganisations

Foreigners*

MetsäliittoCooperative

Other companies

Finance andinsurance companies

Public sectororganisations

Ownership structure on 31 December 2015

* incl. nominee registeredSource: Euroland

Q4 2015

500

600

700

800

900

1000

1100

2009 2010 2011 2012 2013 2014 2015

Taivekartonki Valkopintainen kraftlaineri

Price development of FBB and white-top kraftliner in

Europe in 2009–2015

Sources: Pöyry Management Consulting ja FOEX Indexes Ltd

EUR/ tn

Folding boxboard White-top kraftliner

9.2.2016

Price development in pulp (PIX) 2004–2015

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

'04 '05 '06 '07 '08 ´09 '10 '11 '12 '13 '14 '15

350

400

450

500

550

600

650

700

750

800

850

900

950

1000

1050

Havu

Lehti

Lehti

Havu

USD

EUR

USD

Source: Foex Indexes Ltd

EUR