Metsä Group’s Full Year Result 2020

Metsä Group’s Full Year Result 2020

Ilkka HämäläPresident and CEO

11 February 2021

• Sales EUR 5,055 million (2019: EUR 5,473 million)• Operating result* EUR 368 million (EUR 495 million)• Operating result* 7.3% of sales (9.0)• Return on capital employed* 7.1% (9.6)• Sales decreased due to lower sales prices of pulp • Profitability decreased due to a decline in the sales prices of

pulp and the strikes in Finland in early 2020. The strikes had a negative operating result impact of EUR 50 million

• Exchange rate fluctuations had a positive effect of EUR 51 million on the operating result

• Metsä Group advanced its investment projects as planned

Profitability improved towards the end of the year

11.2.2021

Metsä Group – Result 2020

*comparable

• The price of long-fibre pulp increased and that of short-fibre pulp remained stable compared to Q3/2020

• Paperboard deliveries were higher than in Q4/2019 and declined seasonally from Q3/2020

• The market situation of sawn timber and veneer products improved

• Environmental permit was granted to Kemi bioproduct mill

• A 30% share of Husum pulp mill in Sweden was divested to Norra Skog. The final decision to renew the mill’s recovery boiler and turbine was made

• The maintenance shutdowns postponed to the second half of the year were implemented successfully

Events during the fourth quarter

11.2.2021


11.2.2021 4

Sales


EUR million

4,6585,040

5,7095,473

5,055

0

1000

2000

3000

4000

5000

6000

2016 2017 2018 2019 2020

11.2.2021 5

1,156 1,184 1,143 1,175 1,216 1,235 1,2601,328

1,4281,477

1,386 1,419 1,4381,372 1,374

1,290 1,2531,200

1,245

1,357

0

200

400

600

800

1 000

1 200

1 400

1 600

Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4

Sales quarterlyEUR million


11.2.2021 6

Comparable operating result


EUR million

439

566

849

495

368

0

200

400

600

800

1000

2016 2017 2018 2019 2020

11.2.2021 7

109120

103 107

128119

134

185

208 210223

208

180

128

110

7662

96

115

94

0

50

100

150

200

250

Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4


EUR million

Comparable operating result, quarterly

11.2.2021 8

Change in comparable operating result


EUR million

Comparable operating result 1–12/2019 495Sales prices -195Sales volumes -44Exchange rates (after hedging) 51Change in wood raw material unit costs 34Change in raw material, energy and other variable costs unit costs 67Employee costs 8Maintenance and other fixed costs -11Change in inventories (including volume and valuation) -29Depreciation and other -8

Comparable operating result 1–12/2020 368

11.2.2021 9

Items affecting comparability


EUR million 2020

OPERATING RESULT (IFRS) 375.8

Items affecting comparability:

Metsä Tissue / Items related to the sales of napkin business 1.3

Metsä Board / Sale of non-business related land area -6.0

Metsä Tissue / Insurance indemnity and divestment of fixed assets -3.3

Items affecting comparability, total -8.1

COMPARABLE OPERATING RESULT 367.7

10.2

12.3

16.8

9.6

7.1

0

4

8

12

16

20

2016 2017 2018 2019 2020

11.2.2021 10

Comparable ROCE


%

Target > 12%

11.2.2021 11

Equity ratio


43.9 45.0

53.156.2 57.2

0

10

20

30

40

50

60

2016 2017 2018 2019 2020

%

11.2.2021 12

Interest-bearing net liabilities


1,033 993

463374

168

0

300

600

900

1 200

1 500

2016 2017 2018 2019 2020

EUR million

11.2.2021 13

Capital expenditure


762

631

274 260

401

0

200

400

600

800

1000

2016 2017 2018 2019 2020

EUR million

Includes investments in leased fixed assets.

11.2.2021 14

Personnel


9,300 9,126 9,310 9,265 9,213

0

3 000

6 000

9 000

12 000

2016 2017 2018 2019 2020

• The benefits of digital business were highlighted in the pandemic. Half of the wood acquired from private forest owners was purchased digitally

• Harvesting and transportation conditions in Finland were normal, but the harvesting of winter stands started only in December

• Deliveries were carried out smoothly. Wood was delivered 32.7 million m3 (34.7)

• Wood prices were stable in the beginning of the year, but the prices of log wood began to rise during Q4/2020

11.2.2021 15

Wood deliveries progressed well

Metsä Forest – Wood Supply and Forest Services

Sales and comparable operating result EUR million

490 496471

526 526508

474 465431

471449

469

8.7

5.8

8.9 8.9

11.3

5.65.0

5.6

3.4 3.9

6.2

8.9

0

3

6

9

12

15

18

0

100

200

300

400

500

600

Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4

Sales Operating result

• Market situation improved towards the end of the year

• Profitability improved due to lower raw material, energy and labour costs and the improved result of the UK business

• The strike at Finnish mills and the pandemic weakened profitability

• The delivery volumes of Kerto LVL and spruce plywood declined slightly, but the delivery volumes of birch plywood increased

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Full-year profitability of wood products improved

Metsä Wood – Wood Products Industry


109119

106 108 111119

111

9387

104

122 117

6.25.5

2.8 2.2 1.83.3 3.1

-1.1

-3.3

1.3

6.64.7

-4

0

4

8

12

16

20

-30

0

30

60

90

120

150

Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4


• Demand for pulp strengthened in Q4/2020, particularly in China, and prices in Asia began to increase. Europe follows Asia with a delay

• Demand for sawn timber, which had slowed down at the beginning of the year, picked up towards the end of the year in all main markets

• The USD-denominated average market prices of long-fibre pulp in 2020 decreased by 14% in Europe and by 7% in China

• Construction of the pine sawmill in Rauma progressed as planned

• The investment decision for the Kemi bioproduct mill was made in February 2021

11.2.2021 17

Market situation for pulp and sawn timber is recovering

Metsä Fibre – Pulp and Sawn Timber Industry


601629 609 630 623

556 567

490

412 428 459

528

144.9164.9

187.0172.0

122.4

83.1

33.29.9

-21.3

16.0 17.1

-8.0 -40

0

40

80

120

160

200

240

280

-100

0

100

200

300

400

500

600

700

Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4


400

600

800

1000

1200

1400

400

600

800

1000

1200

1400

´12 ´13 ´14 ´15 ´16 ´17 ´18 ´19 ´20Hardwood/EUR Softwood/EUR Hardwood/USD Softwood/USD Softwood/China/USD

11.2.2021 18

Price of pulp (PIX) in Europe and China

Metsä Fibre – Pulp and Sawn Timber Industry

USD EUR

Source: Fast Markets Foex

• Profitability was improved by lower production costs and a positive exchange rate development

• The result was burdened by the Finnish paper workers’ strike at the beginning of the year

• Metsä Board divested a 30% share of Husum pulp mill to Norra Skog

• The investment decision for the first phase of the renewal of the Husum pulp mill was made in December 2020

• In January 2021, Metsä Board initiated pre-engineering to increase the folding boxboard production capacity by 200,000 tonnes at the Husum mill in Sweden

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The operating result of the paperboard industry improved clearly from the previous year

Metsä Board – Paperboard Industry

492519

475 458487 477 489 478 472 473 471 473

69.059.2

64.0 60.0 61.8

41.0 42.5 39.133.8

60.5 62.5 64.5

0

20

40

60

80

100

120

0

100

200

300

400

500

600

Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4



500

600

700

800

900

1000

1100

1200

500

600

700

800

900

1000

1100

1200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Folding boxboard

White-top kraftliner

11.2.2021 20

Paperboard market price development in Europe

Metsä Board – Paperboard Industry

EUR/ tonne

Sources: Fastmarkets RISI & Fastmarkets FOEX

EUR/ tonne

• Operating profit was improved by efficiency measures and lower variable costs

• After the strong growth caused by the pandemic, demand started to decline, but picked up again towards the end of the year

• Demand for greaseproof papers remained good• The divestment of the napkin business was

completed at the beginning of the year• Metsä Tissue renews a tissue paper machine at its

Mänttä mill• In the spring of 2020, the company initiated an

environmental permit procedure for the renewal of the Mariestad mill in Sweden

11.2.2021 21

Clear result improvement in tissue and greaseproof papers

Metsä Tissue – Tissue and Greaseproof Papers

259 256 254270 267 266 263 264

293

224237

258

12.3 11.5

6.4 6.1

10.513.5

22.8

26.6

40.5

23.6 22.7

27.1

0

8

16

24

32

40

48

0

50

100

150

200

250

300

Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20 Q2 Q3 Q4



• Demand for Kerto LVL remains strong, particularly in North America and Australia. Demand for softwood plywood is strong. Competition in the birch plywood continues to be tough in Europe

• The rise in softwood pulp prices that began at the end of 2020 has continued during Q1/2021. Demand for pulp is growing, particularly in Asia. Demand for sawn timber remains strong

• Paperboard deliveries are expected to increase in Q1/2021 compared to Q4/2020. Linerboard prices are expected to rise and folding boxboard prices to remain stable

• Demand for tissue paper is expected to grow as pandemic restrictions are lifted. Demand for greaseproof papers is expected to continue in growth trend

11.2.2021 22

Market outlookSummary

Metsä Group’s comparable operating result is in the first quarter of 2021 expected toimprove from the fourth quarter of 2020

11.2.2021 23

Near-term result outlook

Summary

• Increase of the value of Finnish forests• Profitable growth together with customers• Reduction of fossil fuel consumption• Increase of renewable energy production• Replacing fossil materials with renewables• Higher amount of carbon stored in wood based products

that have a long life span

11.2.2021 24

Metsä Group’s main strategic objectives

25

Being a forerunner requires investments

2015–2018: Investments of EUR 2 billion 2019–2023: Investments of EUR 2.5 billion

Äänekoski bioproduct mill

Punkaharju, Lohja and Pärnu mills

Husumpaperboard machine

11.2.2021

Husum pulp and paperboard mills

Textile fibre demo plant

Kemi linerboard mill

Kemi bioproduct mill

Rauma sawmill

• Strong customer demand for the new capacity• Wood sourcing plans finalized• Finnish State’s investments to logistics

infrastructure ensure improved transportation of raw materials and products

• Permissions to commence operations granted• Financing agreed• Good and active cooperation with Finnish

government, authorities and other stakeholders

New EUR 1.6 billionbioproduct mill will bebuilt in Kemi

11.2.2021

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Metsä Group’s Full Year Result 2020