the pandemic are monitored and followed · 1 day ago · recovery of printing and writing paper production will strengthen demand if it actualizes • Demand for sawn timber is expected

• Metsä Group has 3 key priorities: safety of personnel, participation in fighting the pandemic as part of society and ensuring business continuity

• The recommendations issued by the authorities concerning the pandemic are monitored and followed

• Resource situation has remained normal throughout the pandemic

• Infection chains have been prevented through strict safety measures

• Production and deliveries have run normally, with the exception of the units in Great Britain as well as the Svirsawmill and wood supply in Russia in the spring

30.7.2020 Metsä Group2

Impacts of the coronavirus pandemic

Metsä Group – Coronavirus pandemic

Metsä Group Half-year financial report 2020

Ilkka HämäläPresident and CEO30 July 2020

• Sales EUR 2,453 million (Q1–Q2/2019: EUR 2,809 million)• Operating result* EUR 158 million (308)• Operating result of sales* 6.5% (11.0)• Return on capital employed* 6.2% (12.1)• Lower pulp prices main reason for decreased sales• Operating result declined due to lower pulp prices and the

strikes in Finland (negative impact of EUR 50 million)• Exchange rate fluctuations, particularly concerning USD, had a

positive effect of around EUR 38 million


Metsä Group’s result improved towards the end of the period

Metsä Group – H1 2020

*comparable

• Long-fibre pulp prices increased and short-fibre prices remained stable compared to Q1/2020. Prices were clearly lower than in Q2/2019

• Paperboard deliveries increased year-on-year, and prices remained relatively stable

• Earthworks of Rauma sawmill began, agreements were signed on the main equipment and construction engineering

• Kemi bioproduct mill’s pre-engineering progressed as planned, incl. environmental permit process. Preliminary agreements were signed related to the construction

• Pre-engineering and preparatory construction work related to Husum pulp mill renewal progressed as planned

• Maintenance shutdowns postponed until H2 due to the pandemic

30.7.20205

Events during the second quarter


Metsä Group


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

1,428 1,4771,386 1,419 1,438

1,372 1,3741,290 1,2531,200

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

Sales quarterlyEUR million



109120

103 107128 119

134

185

208 210223

208

180

128110

7662

96

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


EUR million

Comparable operating result

Change in comparable operating result

Metsä Group8


EUR million

Comparable operating result 1–6/2019 308Sales prices -153Sales volumes -59Exchange rates 38Wood raw materials 16Raw materials, energy and other variable costs 23Employee costs 14Maintenance and other fixed costs 11Change in inventories -24Depreciation and other -14

Comparable operating result 1–6/2020 158

30.7.2020

Items affecting comparability

Metsä Group9


EUR million 1–6/2020

OPERATING RESULT (IFRS) 163.2

Items affecting comparability:

Metsä Tissue / Divestment of the napkin business 1.3

Metsä Board / Sale of a land area not related to business operations -6.0

Items total -4.7

COMPARABLE OPERATING RESULT 158.5

30.7.2020


Comparable ROCEMetsä Group – H1 2020

11.0 11.5

16.9

12.1

6.2

0

2

4

6

8

10

12

14

16

18

1–6/2016 1–6/2017 1–6/2018 1–6/2019 1–6/2020

%

Target > 12%


Equity ratio


43.9 45.0

53.156.2 56.4

0

10

20

30

40

50

60

12/2016 12/2017 12/2018 12/2019 6/2020

%


Interest-bearing net liabilities


1,033 993

463374

423

0

200

400

600

800

1 000

1 200

12/2016 12/2017 12/2018 12/2019 6/2020

EUR million


Capital expenditure

762

631

274 260168

0

200

400

600

800

1000

2016 2017 2018 2019 1–6/2020

EUR million


Includes investments in leased fixed assets


Personnel


9,300 9,126 9,310 9,2659,854

0

3 000

6 000

9 000

12 000

2016 2017 2018 2019 06/2020

*including approximately 800 summer employees

*

Strikes and pandemic decreased wood deliveries in the first half of the year

• Harvesting and log deliveries were restricted due to the strikes and the decrease in demand caused by the pandemic

• Metsä Forest delivered 16.3 million m3 (18.9) of wood to its customers in H1

• After the wet and warm weather in early 2020, harvesting and transport conditions returned to normal in the Baltic Sea region, and supply and demand stabilised

• In Finland log prices remained stable, pulpwood prices increased towards the end of the period

• 80% advance funding for regeneration felling in wood trades in February–April


Sales and comparable operating result EUR million

Metsä Forest – Wood Supply and Forest Services

490 496471

526 526 508474 465

431471

8.7

5.8

8.9 8.9

11.3

5.65.0

5.6

3.4 3.9

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

Sales Operating result

Pandemic causes uncertainty in the wood products markets

• Delivery volumes declined due to the strikes at the mills in Finland and the decrease in demand caused by the pandemic

• The market situation began to normalize towards the end of the period

• Average sales prices of wood products decreased• Production at the UK units was closed for roughly

five weeks• ITI became the most significant distributor of Kerto

LVL products in Australia as a result of strategic partnership



Metsä Wood – Wood Products Industry

109119

106 108 111119

111

93 87104

6.2 5.5

2.8 2.2 1.83.3 3.1

-1.1

-3.3

1.3

-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


Profitability of pulp and sawn timber was affected by the weak market situation and strikes

• Lower sales prices and sales volumes, as well as the strikes decreased the operating result

• Price level of pulp and sawn timber remained low during H1

• Demand for softwood pulp was unchanged year-on-year, and for sawn timber returned to a reasonable level towards the end of the period

• Earthworks of the Rauma sawmill begun in May, construction will start in August

• The pre-engineering of Kemi bioproduct mill progressed as planned. The supplemented environmental permit application was submitted in April



Metsä Fibre – Pulp and Sawn Timber Industry

601 629 609 630 623556 567

490412 428145

165187

172

122

83

3310

-21

16

-50

0

50

100

150

200

250

-150

0

150

300

450

600

750

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



Price of pulp (PIX) in Europe and China

Metsä Fibre – Pulp and Sawn Timber Industry

400

600

800

1000

1200

1400

400

600

800

1000

1200

1400

´12 ´13 ´14 ´15 ´16 ´17 ´18 ´19 ´20

Hardwood/EUR Softwood/EUR Hardwood/USDSoftwood/USD Softwood/China/USD

USD EUR

Source: Fast Markets Foex

Metsä Board’s business performed well• Deliveries of paperboard increased • Paperboard prices remained relatively stable • Lower production costs and positive exchange rate

fluctuations had a positive result impact• The strikes in Finland and decline in pulp prices

had a negative result impact• The pre-engineering of the renewal of the Husum

pulp mill and the preparatory construction work progressed as planned



Metsä Board – Paperboard Industry

492519

475 458487 477 489 478 472 473

6959

64 60 62

41 43 3934

61

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



600

700

800

900

1000

1100

1200

2012 2013 2014 2015 2016 2017 2018 2019 2020

Folding boxboard White-top kraftliner Sources: Fastmarkets RISI & Fastmarkets FOEX

Prices of folding boxboard and white-top kraftlinerin Europe 2012–Q2/2020EUR/tonne

Metsä Board – Paperboard Industry

Good beginning of the year for Tissue and Greaseproof papers

• Result improved due to efficiency measures and lower raw material costs

• Demand for tissue paper products for consumers and professional customers increased rapidly with the outbreak of the coronavirus pandemic. Strong sales growth levelled off in the second quarter

• Demand for greaseproof papers continued strong• Metsä Tissue submitted the environmental permit

application to increase tissue paper capacity at the Mariestad mill



Metsä Tissue – Tissue and Greaseproof Papers

259 256 254270 267 266 263 264

293

224

12 12

6 611

14

2327

41

24

0

10

20

30

40

50

60

0

50

100

150

200

250

300

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


• Global development of the pandemic is directly reflected in harvesting and wood supply

• Kerto LVL demand outlook is uncertain. Demand for spruce plywood continues strong, and for birch plywood below normal

• Pulp market is affected by maintenance shutdowns postponed from the spring, and other announced production restrictions. The recovery of printing and writing paper production will strengthen demand if it actualizes

• Demand for sawn timber is expected to improve seasonally during the summer and autumn

• Paperboard deliveries in Q3/2020 are expected to decrease slightly compared to Q2/2020. The market prices are expected to remain stable

• Demand for tissue paper is expected to increase, provided that the restrictions caused by the pandemic continue to be lifted


Summary

Market outlook

• Metsä Group’s comparable operating result is in the third quarter of 2020 expected to weaken from the second quarter of 2020


Near-term result outlook

Summary

Documents

the pandemic are monitored and followed · 1 day ago · recovery of printing and writing paper production will strengthen demand if it actualizes • Demand for sawn timber is expected