Investor Presentation 2Q 2014 5.9. 2014 Mets Board Mets Group - - PowerPoint PPT Presentation

Metsä Group

Metsä Board

Investor Presentation 2Q 2014

5.9. 2014

Metsä Group

Metsä Board

2

Content

Investment highlights and update 3 Investment Highlights 4 Financial Targets and Dividend 9 Strategy 25 2Q 2014 Results & Outlook 35 Price Development 38 Investments Funding and debt information 41 Divestments 42 Funding and Debt 49 Credit Facilities 50 Rating History General presentation 52 General Info 62 Business Portfolio 69 Operations 75 Deliveries 77 Sourcing 85 Sustainability 90 Owners 92 Market Positions

Metsä Group

Metsä Board

Investment Highlights

‒ Strong growing core in high-quality paperboards

‒ European market leader in folding boxboard and global market leader in coated white top kraftliner ‒ Increased capacity in the most profitable part of the company, folding boxboard and linerboard ‒ Good further growth potential in both folding boxboard and linerboard

‒ Profitability of the paperboard production top class in its field ‒ Significant net debt reduction in recent years ‒ Material productivity improvement in recent years

3

Metsä Group

Metsä Board

Financial Targets and Dividend

Metsä Group

Metsä Board

Financial T argets

‒ ROCE target set at a minimum of 10% on average over the business cycle ‒ Net gearing not to exceed 100%

Minimum ROCE 10%* Maximum net gearing 100%

* Excluding non-recurring items

184% 119% 137% 82% 95% 126% 99% 90% 84% 83% 106% 72% 65% 70% 83% 145%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 2Q14

Maximum level of 100% 13,5% 6,2% 2,1% 1,6% 0,5% 0,9% 2,8%

• 0,5%
• 5,6%

7,6% 3,4% 4,8% 6,4% 8,8% 10,2% 7,6%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1H14

Minimum target of 10%

5

Metsä Group

Metsä Board

Main Actions to Exceed ROCE 10 %

6

‒ Increase of folding boxboard and linerboard sales and secure healthy price levels ‒ Gradual reduction of unprofitable paper production in Husum ‒ Profitability improvement of Gohrsmühle mill ‒ Continuous improvement of productivity and cost competitiveness ‒ Efficient supply chain and working capital management

Metsä Group

Metsä Board

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

Metsä Group

Metsä Board

0,50 1,09 1,13 1,85 0,46 0,30

• 0,79
• 1,58
• 1,09
• 0,83

0,52 0,26 0,37 0,38 0,51 0,51 0,51 0,25 0,00 0,00 0,00 0,09 0,19 0,23

• 0,43
• 0,25
• 1,21
• 0,59

0,09 0,12 0,12 0,14 0,06 0,06 0,06 0,00

3,0% 3,4% 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

0,5 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 € per share

• 8 %
• 6 %
• 4 %
• 2 %

0 % 2 % 4 % 6 % 8 % 10 % 12 % Dividend yield, % Earnings per share Dividend per share Dividend yield

Dividend yield calculated from annual average B-share volume weighted price

Dividend Yield

8

Metsä Group

Metsä Board

Strategy

Metsä Group

Metsä Board

Consistent Strategy

10

‒ Paperboard is Metsä Board’s core business

‒ Focus on high-quality paperboards

‒ Smaller but healthier paper business

‒ Heavy re-engineering and successful divestments

‒ Extensive fibre know-how and pulp self-sufficiency

‒ Metsä Board’s role in Metsä Fibre’s planned new pulp mill in Äänekoski to be clarified latest early next year

‒ Continuous development towards Super Productivity

Largest Folding Boxboard Producers in Europe

Source: Metsä Board, Pöyry Management Consulting Oy

Largest White Top Kraftliner and Fully Bleached Kraftliner Producers in Europe

Holmen

Metsä Group

Metsä Board

Paperboard incl. Market PulpAccountsAlready 75 per cent of Sales

11

Sales distribution 2Q 2014

Paperboard 61% Paper 24% Market pulp 15%

Sales distribution 2006

Paper 56% Paperboard 18% Paper merchanting 26%

Metsä Group

Metsä Board

Metsä Board’s Productivity Has Been Improved by Almost 70 per cent Since 2006

Year end 12

Capacity per employee in Metsä Board’s board, paper and pulp mills

300 600 900 1 200 1 500 1 800 2006 2007 2008 2009 2010 2011 2012 2013

tonnes/a/person

Metsä Group

Metsä Board

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

13

Highest growth in paperboard packaging, accounting for the largest share of the total

Metsä Group

Metsä Board

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

14

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

Metsä Group

Metsä Board

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

15

Consumer Goods Companies Fresh forest fibre linerboard

Graphical end-uses

Carton printers Merchants Corrugated box manufacturers

Folding boxboard

Metsä Group

Metsä Board

16

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

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

Metsä Group

Metsä Board

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

17

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 Group

Metsä Board

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

18

Sources: Metsä Board & Risi

Total cartonboard market 15 million t/a Demand growth 5%/a WLC 73% FBB 22% Others 5%

Metsä Group

Metsä Board

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’

19

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%

Metsä Group

Metsä Board

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

• ffering enabling growth in totally new end uses

‒ Steady decrease of unprofitable paper volumes in Husum

‒ 70 % growth in North America during the past 5 years

‒ USA today the biggest single market ‒ All leading corrugated box manufacturers as main customers

20

Metsä Board’s fresh forest fibre linerboard deliveries in 1H 2014

EMEA 63% Americas 36% Asia-Pacific 1%

Metsä Board’s fresh forest fibre linerboard deliveries to North America, 1,000 tonnes

30 60 90 120 150 2009 2010 2011 2012 2013

+70%

Metsä Group

Metsä Board

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

21

Metsä Group

Metsä Board

Growth Accelerating by Expansion to North America and Entering New End Use Segments Combined with Steady Organic Growth in Europe

Folding boxboard

‒ Continued steady growth in Europe ‒ Aggressive growth in North America to over 200 000 t/a in mid-term ‒ Food service and cup stock deliveries to over 100 000 t/a in mid-term

Fresh forest fibre linerboard

‒ Fully utilize Kemi’s new doublecoated products market potential ‒ Maximize Husum’s light-weight linerboard volumes ‒ Total linerboard sales to exceed 650 000 t/a in mid-term

22

Paperboard deliveries, 1,000 tonnes

200 500 800 1 100 1 400 2011 2012 2013

1000 tonnes

+12%

Metsä Group

Metsä Board

Key Focus Areas in 2014

1.Increase folding boxboard sales further based on the light weight concept

• Fully benefit the current folding boxboard capacity
• Prepare for the next capacity increase
• 2. Clear increase of fresh forest fibre linerboard sales
• Full utilization of Husum’s liner production potential
• Further increase of Kemi mill’s production output
• 3. Secure good folding boxboard and fresh forest fibre linerboard price levels
• 4. Develop and launch new folding boxboard and fresh forest fibre linerboard products
• 5. Maximize cash flows from decreasing paper businesses
• 6. Continuous improvements to achieve Super Productivity and Best-in-Class supply chain

23

Metsä Group

Metsä Board

New Innovative Light-Weight Paperboards Introduced in 1Q 2014 to Broaden Offering and Accelerate Growth

24

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

Metsä Group

Metsä Board

2Q 2014 Results and Outlook

Metsä Group

Metsä Board

Key Events in 2Q 2014

‒ Paperboard delivery volume continued to increase. Increase of FBB sales to North American markets progressed as planned ‒ Price levels of the main products were stable ‒ Profitability weakened due to successfully completed annual maintenance shutdowns at Husum and Metsä Fibre’s Äänekoski and Joutseno mills ‒ Clear net debt reduction to EUR 540 million due to very strong cash flow ‒ Introduction of new folding boxboards and linerboards proceeded successfully ‒ Mika Joukio appointed as the new CEO latest as of 1 December 2014

26

Metsä Group

Metsä Board

30 19 29 28 6 25 20 24 26 36

10 20 30 40 50 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

545 522 532 509 535 503 479 502 501 494

200 400 600 800 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

• 9

17 10 9 19 9 18 4 20 21

• 10

10 20 30 40 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

Sales, m€ Operating result excl. non-rec. items, m€ Result before taxes excl. non-rec. items, m€

Operating Result in 2Q 2014 Weakened as Expected Due to Annual Maintenance Shutdowns

27

Metsä Group

Metsä Board

‒ Result was improved mainly by higher folding boxboard delivery volumes ‒ Result was weakened by Metsä Fibre’s Äänekoski and Joutseno pulp mills’ annual shutdowns ‒ Folding boxboard price level was stable in 2Q 2014 and no material changes are expected in the coming months ‒ Folding boxboard deliveries are expected to slightly increase in 3Q 2014 ‒ Good service ability for North American customers guaranteed by increased inventories ‒ Great start for recently launched folding boxboards Carta Dedica for cups and plates and Carta Allura for luxury packaging

28

EBIT, excl. non-recurring items Sales

Cartonboard’s 2Q 2014 Operating Result Continued to Improve

m€ m€

18 20 20 12 15 10 6 12 18 24 30

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

219 214 208 220 218 222 50 100 150 200 250

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

Metsä Group

Metsä Board

Linerboard and Paper’s 2Q 2014 Result Weakened by the Maintenance Shutdowns

‒ Result was weakened mainly by the scheduled annual maintenance shutdowns at Husum and Metsä Fibre’s Äänekoski and Joutseno mills ‒ Fresh forest fibre linerboard deliveries were at strong level but decreased slightly from previous quarter. Prices were stable ‒ Paper delivery volumes decreased and prices remained stable at low levels ‒ Market pulp delivery volumes increased and prices were stable ‒ Fresh forest fibre linerboard deliveries are expected to increase slightly in 3Q. Paper and pulp deliveries are forecast to remain at previous quarter level ‒ No material price changes in sight in the main products ‒ Kemi maintenance shutdown has some negative result impact in 3Q

29

EBIT, excl non-recurring items

m€ m€

Sales

20 15 15 16 7 20 5 10 15 20 25 30

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

271 262 288 269 267 250 50 100 150 200 250 300 350

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

Metsä Group

Metsä Board

Short-Term Profitability Outlook

30

‒ Metsä Board’s operating result, excluding non- recurring items is in the third quarter of 2014 expected to improve slightly from the second quarter of 2014

Metsä Group

Metsä Board

Strong Growth in Paperboard Businesses Continues

‒ Metsä Board’s paperboard deliveries increased in 1H 2014

• ver 6 % from last year despite recession in domestic market

Europe ‒ Target is to further grow both FBB and fresh forest fibre linerboard businesses

‒ Continued growth in Europe and increased efforts in Asia and especially in North America

‒ Sentiment in paperboard market has further improved in recent weeks and order inflows have somewhat strengthened

31

169 176 185 185 189 192 197 185 191 197 80 85 93 85 94 93 95 91 109 108

50 100 150 200 250 300 350

1 Q 1 2 2 Q 1 2 3 Q 1 2 4 Q 1 2 1 Q 1 3 2 Q 1 3 3 Q 1 3 4 Q 1 3 1 Q 1 4 2 Q 1 4

Fresh forest fibre linerboard Folding boxboard

Paperboard deliveries, 1000 tonnes

Metsä Group

Metsä Board

Metsä Board’s FBB Has Proven Its Competitiveness Among North American Consumer Goods Companies and Converters

32

‒ Missing piece to the North American cartonboard offering enabling the enhancement of sustainability ‒ Even over 30 % lighter in weight than competing paperboards ‒ Long-term contracts signed with several leading North American converters and merchants ‒ Target in 2014 is to at least double FBB deliveries to North America from the 35 000 tonnes last year

5 10 15 20 25 2Q13 3Q13 4Q13 1Q14 2Q14

FBB deliveries to North America, 1,000 tonnes

+200 %

Metsä Group

Metsä Board

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

33

‒ Kemi’s production will by end 2014 focus almost fully on higher value added coated grades. Uncoated grades will mostly be produced in Husum

‒ Kemi mill’s annual capacity will be increased from 375 000 to 400 000 tonnes

‒ Husum’s linerboard production developing as planned to exceed 100 000 tonnes in 2014 ‒ Target is to benefit Husum’s full linerboard production potential of close to 300 000 tonnes during the next few years ‒ Capacity additions have been announced also by other producers. Market balance in the high quality segment is expected to remain healthy

Metsä Group

Metsä Board

Target is to Cover the Normal 1-2 %/a Cost Inflation by Own Continuous Improvement Measures

34

Cost item Share of total costs Cost change in 2014 vs. 2013 Wood 22 %

• 2 %

Logistics 14 % +2 % Chemicals, pigments and fillers 15 % 0 % Energy 14 %

• 4 %

Fixed costs 32 % +1 % Fixed and variable costs total

• 1 %

No cost inflation expected in 2014

Metsä Group

Metsä Board

EUR / tonne

Folding Boxboard Market Price in Europe 2004 – 2Q 2014

35

Source: Pöyry Management Consulting

800 900 1000 1100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Metsä Group

Metsä Board

36

500 600 700 800 900 2009 2010 2011 2012 2013 2014

White-Top Kraftliner Market Price in Europe 2009 – 2Q 2014

Source: Foex

Metsä Group

Metsä Board

EUR / tonne

Paper and Pulp Market Price in Europe 1998 – 2Q 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

37

Metsä Group

Metsä Board

Investments

Metsä Group

Metsä Board

40 67 66 95 73 72 128 259 428 100 200 300 400 500 2006 2007 2008 2009 2010 2011 2012 2013 2014 M illion €

Capital Investments about 40 m€ in 2014

*Indicative level for 2014

39

Metsä Group

Metsä Board

Funding and Debt Information

40

Metsä Group

Metsä Board

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 3,671

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

41

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

26

Metsä Group

Metsä Board

Thanks to Strong Cash Flow Net Debt Reduced to EUR 540 Million

‒ Gross debt EUR 699 million and net debt EUR 540 million ‒ Net gearing 65 %, equity ratio 40 % and average interest rate reduced to 4.2% at the end of 2Q 2014 ‒ Funds from operations increased to EUR 102 million in 2Q ‒ ONWC reduced clearly from 1Q due to accounts payable improvement measures and timing reasons ‒ Solid liquidity position of over EUR 400 million

42

Net Debt / EBITDA Net Debt, m€

540 827 250 500 750 1000

2010 2011 2012 2013 2Q14

2,5 2,7 1 2 3 4 5

2010 2011 2012 2013 2Q14

Metsä Group

Metsä Board

Loans and Interest Rate

At the end of 2Q 2014 ‒ Average maturity of long term loans 3,8 years ‒ Average interest rate of loans (including derivatives) 4,2 % ‒ Interest rate maturity of loans (including derivatives) 33 months ‒ Of the loans about 24 per cent was subject to variable interest rates and 76 per cent to fixed interest rates

43

Metsä Group

Metsä Board

Diversified Funding Sources

44

Long-Term Interest Bearing Liabilities 30.6. 2014

32 % 8 % 3 % 29 % 28 % Bonds Pension premium loans Loans from financial institutions Finance leases Other interest bearing liabilities

Total 693 m€

Metsä Group

Metsä Board

Interest Bearing Net Liabilities 30.6.2014

‒ Long-term 693 ‒ Short-term 6 Total interest bearing liabilities 699 ‒ Liquidity and interest bearing receivables 159 Interest bearing net liabilities 540

45

m€

Metsä Group

Metsä Board

Well Balanced Maturity Schedule

14 100 34 83 181 253 24 4 100 14 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 2020 >2 020 Long-term interest bearing liabilities Committed undrawn credit facilities

m€

46

Long-term Interest Bearing Liabilities and Committed Undrawn Credit Facilities 30.6.2014

Metsä Group

Metsä Board

Balance Sheet Ratios

47

777 827 783 625 597 540 17,7 2,7 4,4 3,4 2,9 2,5 100 200 300 400 500 600 700 800 900 2009 2010 2011 2012 2013 2Q 14 2 4 6 8 10 12 14 16 18 20

Net Debt and Net Debt/EBITDA* Net Gearing, %

65 84 83 106 72 70

20 40 60 80 100 120 2009 2010 2011 2012 2013 2Q14

Net debt, m€ Net debt/EBITDA *Excluding non-recurring items

Metsä Group

Metsä Board

39,8 33,3 32,4 38,7 40,7 41,0 5 10 15 20 25 30 35 40 45

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

65 69 70 75 74 69 10 20 30 40 50 60 70 80

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

Quarterly Balance Sheet Ratios

Equity Ratio Net gearing

% %

48

Metsä Group

Metsä Board

Debt Programs 30.6.2014

49 The following table sets forth the significant debt securities issued and outstanding of Metsä Board as at June 30, 2014 Average Long-term borrowings Total amount Outstanding I nterest Rate * ) Maturity EUR 225 million Bond Issue 2014 EUR 225 EUR 225 4,5 % 2019 Syndicated credit facility 2014 EUR 250 EUR 150 5,1 % 2018 EUR 103 million bilateral loans EUR 103 EUR 103 3,6 % 2014-2017 EUR 24 million finance leases EUR 24 EUR 24 2,3 % 2014-2020 EUR 210 million pension loans EUR 210 EUR 195 3,8 % 2014–2020 *) 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 30.6.2014 is 4,2 %. The following table sets forth Metsä Board´s principal long-term liquidity reserves as at June 30, 2014: Average Liquidity reserves Total amount Outstanding I nterest Rate * ) Maturity (EUR in millions) Revolving Credit Facility 2014 EUR 100 EUR 0 – 2018 Pension loan facilities EUR 210 EUR 195 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 2 0,4 % 0-12 months (currency in millions)

Metsä Group

Metsä Board

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

• utlook 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

• utlook

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

50

Metsä Group

Metsä Board

Positive Rating Development

51

Moody’s Standard & Poor’s

2005 2006 2007 2008 2009 2010 2011 2012 2013

BB+ | Ba1 BB | Ba2 BB- | Ba3 B+ | B1 B | B2 B- | B3 CCC+ | Caa1 CCC | Caa2

Positive Positive

Metsä Group

Metsä Board

General Presentation

Metsä Group

Metsä Board

Metsä Board in Brief

‒ Annual sales about 2.0 b€ ‒ The leading European fresh forest fibre paperboard company ‒ Major uncoated fine and printing paper and market pulp supplier ‒ Valuable holdings in Metsä Fibre and Pohjolan Voima ‒ Main customers are brand owners, printers, corrugated packaging manufacturers, merchants and office products suppliers ‒ 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,

• ne of the largest forest industry groups in Europe

53

Metsä Group

Metsä Board

Offering for Consumer Packaging, Communications and Advertising

‒ Cartonboards and white-top fresh forest fibre linerboards for packaging beautycare, healthcare, cigarettes, food, consumer durables etc. ‒ Graphic boards e.g. for book covers, postcards, greeting cards, CD or DVD covers ‒ Office papers from high-volume copying and printing to high-quality color presentations ‒ Speciality papers for advertising and corporate materials, creative designs, labeling and for wallcovering industry

54

Metsä Group

Metsä Board

Customers

Office product resellers Brand owners Printers and converters Advertising and design agencies Office paper users Paper merchants

55

Metsä Group

Metsä Board

17 % 32 % 12 % 9 % 12 % 6 % 9 % 3 % Paper Pulp Paperboard Packaging Tissue Mechanical Forest Products Merchanting Chemicals

59 % 25 % 16 %

Focus on Core Businesses

1995 Sales €2.3 billion 2013 Sales €2.0 billion 8 Businesses 3 Businesses

56

Metsä Group

Metsä Board 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

57

Rest of Reflex 0.5% in PVO

2012

7.3 % in Metsä Fibre

2013 2014

Alizay mill Lielahti real estate

Metsä Group

Metsä Board

Annual Sales Development

2019 2108 2485 2605 2432 3236 4440 5624 5241 5460 6044 6564 6923 5898 3319 3014 2313 4044 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

EUR, million

58

Metsä Group

Metsä Board

EBITDA Development

59

EBITDA excl. non-recurring items, m€

114 208 186 179 305 44 60 120 180 240 300 2009 2010 2011 2012 2013 1H 2014

Metsä Group

Metsä Board

Metsä Board Organization

CEO Mikko Helander* Linerboard and Paper Seppo Puotinen* Cartonboard Ari Kiviranta* Business Services and Development Sari Pajari* Purchasing Jani Suomalainen* CFO Markus Holm* HR Susanna Tainio

* Member of Corporate Management Board

60

Metsä Group

Metsä Board

Mika Joukio (50) the New Metsä Board CEO Latest as of 1 December 2014

61

‒ MSc (Tech), MBA ‒ CEO of Metsä Tissue Corporation since 2012 ‒ Extensive experience in Metsä Board’s paperboard businesses including

‒ Head of paperboard business area and deputy to the CEO ‒ Several mill manager positions ‒ Head of corporate logistics and supply chain

Metsä Group

Metsä Board

Business Portfolio

62

Metsä Group

Metsä Board

63

Linerboards from Kemi Folding Boxboard Linerboards from Husum

Metsä Board Is Now Able to Offer Even Wider Coverage of High-Quality Paperboards for Consumer Goods Companies and Converters

Metsä Group

Metsä Board

Business Portfolio

Cartonboard Linerboard and Paper

64

Metsä Group

Metsä Board

Cartonboard Business Area

‒ High quality and ecological folding boxboard and packaging solutions for global brand owners in beautycare, healthcare, cigarette, food and consumer electronics industries as well as for graphical end-uses ‒ European market leader and global quality leader in folding boxboard ‒ Strong growth in folding boxboard, high earnings stability and segment consolidation ‒ Top class folding boxboard mills with end use specified production

Capacity Share (%) 8 % 8 % 13 % 25 % 34 % 0 % 5 % 10 % 15 % 20 % 25 % 30 % 35 % 40 % Cascades IP Mayr-Melnhoff Stora Enso Metsä Board

• No. 1 Folding Boxboard Producer in Europe

Source: Pöyry Management Consulting Oy 65

Metsä Group

Metsä Board

Linerboard and Paper Business Area

Capacity Share (%)

11 % 14 % 17 % 27 % 28 % 0 % 5 % 10 % 15 % 20 % 25 % 30 % SCA Mondi BillerusKorsnäs Metsä Board SmurfitKappa

• No. 2 White top Fresh Forest Fibre Linerboard Producer in Europe
• High quality white top and fully bleached fresh forest fibre liners for corrugated packaging and consumer packaging
• Strong growth in fresh forest fibre linerboards and high segment consolidation
• Uncoated fine papers for printing and photocopying as well as for forms, envelopes, manuals and communication
• purposes. Additionally, chemical pulp and BCTMP for external customers
• Diversified customer base, e.g. packaging converters, merchants, retail chains, office equipment manufacturers

Source: Pöyry Management Consulting Oy

66

Metsä Group

Metsä Board

Business Area Performance – Comparison to Previous Quarter

Sales, m€ 2Q 2014 1Q 2014

67

214 271 219 262

50 100 150 200 250 300 350 Cartonboard Linerboard and Paper

18 20 20 15

6 12 18 24 30 Cartonboard Linerboard and Paper

Operating result, excluding non-recurring items, m€

Metsä Group

Metsä Board

Business Area Performance – Comparison to Previous Year

1H 2014 1H 2013

68

Sales, m€

440 557 433 532

100 200 300 400 500 600 Cartonboard Linerboard and Paper

32 27 38 35

10 20 30 40 50 Cartonboard Linerboard and Paper

Operating result, excluding non-recurring items, m€

Metsä Group

Metsä Board

Operations

Metsä Group

Metsä Board

200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Paper Board Pulp and BCTMP

1000 tons/a

Production Capacity

70

Metsä Group

Metsä Board

Production Locations

Cartonboard:

• Simpele
• Äänekoski
• Kyro
• Tako
• Gohrsmühle
• Joutseno

Linerboard and Pulp:

• Kemi
• Husum
• Kaskinen

Husum Gohrsmühle Äänekoski Simpele Joutseno Kemi Tako Kyro Kaskinen

71

Metsä Group

Metsä Board

Paperboard and Paper Capacity by Grade

(1000 t/a)

72

PAPERBOARD AND PAPER MI LLS Country Machines Folding Kraftliner Uncoated Speciality Coated Total Boxboard 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 1 375 375 Husum Sweden 3 120 420 260 800 Bergisch Gladbach (Gohrsmühle) Germany 2 50 50 Total 12 935 495 420 155 260 2265

Metsä Group

Metsä Board

Pulp Capacity

(1000 t/a)

73

PULP MI LLS Country Chemical BCTMP Pulp Total Husum Sweden 750 750 Joutseno Finland 290 290 Kaskinen Finland 300 300 Total 750 590 1340 METSÄ FI BRE * Country Chemical Pulp Total Äänekoski Finland 500 500 Kemi Finland 590 590 Rauma Finland 650 650 Joutseno Finland 690 690 Total 2430 2430 * Metsä Board's share is 24.9% of the capacity

Metsä Group

Metsä Board

Personnel Development

3116 3279 4070 4538 4903 6546 9508 14125 15154 16490 21070 22237 17351 20372 5000 10000 15000 20000 25000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

74

Metsä Group

Metsä Board

Deliveries

Metsä Group

Metsä Board

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

76

Fresh Forest Fibre Linerboard Folding Boxboard

26 % 13 % 13 % 48 % Western Europe Eastern Europe Americas Asia and Pacific 6 % 57 % 1 % 36 %

9 % 85 % 6 %

Uncoated Fine Paper

Metsä Group

Metsä Board

Sourcing

Metsä Group

Metsä Board

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

78

Metsä Group

Metsä Board

Electricity Sourcing 2013 (total 2,767 GWh)

Through PVO shareholding 29 % Outsourced generation 2 % Own generation 20 % Purchased energy 49 %

79

Metsä Group

Metsä Board

Fuels Used 2013 (total 13.1 TWh)

Wood-based 58 % Nuclear power 22 % Natural gas 6 % Oil 2 % Peat 2 % Coal 5 % Hydro 5 %

80

Metsä Group

Metsä Board

Wood Sourcing by Country in 2013

1 000 m3 Sweden 1 789 Finland 1 191 Baltic countries 1 074 Russia 764 Total 4 818

81

Metsä Group

Metsä Board

Development of Softwood Pulpwood

Cost at Mill, Wood for Chemical Pulping

1980 – 1Q 2014

Source: Pöyry Management Consulting Oy 82

EUR/m³sob

Metsä Group

Metsä Board

Development of Softwood Pulpwood

Cost at Mill, Wood for Mechanical Pulping

1980 – 1Q 2014

Source: Pöyry Management Consulting Oy 83

EUR/m³sob

Metsä Group

Metsä Board

Development of Hardwood Pulpwood

Cost at Mill, Wood for Chemical Pulping

1980 – 1Q 2014

Source: Pöyry

Source: Pöyry Management Consulting Oy 84

EUR/m³sob

Metsä Group

Metsä Board

Sustainability

Metsä Group

Metsä Board 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

86

Metsä Group

Metsä Board

87

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 SHARE OF CERTIFIED WOOD ABOVE80%

WOOD

SICKNESS ABSENTEEISM BELOW3% ENERGY EFFICIENCY +10%

Metsä Group

Metsä Board

• 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

88

Metsä Board’s purchases by country % Exluding wood supply

Metsä Group

Metsä Board

• 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

89

Metsä Board Greenhouse gas effect (CO2 equivalent, 1,000 tonnes)

Metsä Group

Metsä Board

Owners

90

Metsä Group

Metsä Board

Ownership Structure 30.6.2014

Shares Votes

Source: Euroland

91

Metsä Group

Metsä Board

Market Position

Metsä Group

Metsä Board

100 200 300 400 500 600 700 800 900 1000 Others Holmen Cascades IP Mayr-Melnhof Stora Enso Metsä Board

Folding Boxboard Capacities in Europe

BIG-5 = 88% of total

Capacity: tons/year (thousand) 34% 25% 13% 8% 8% 7% 5%

Source: Pöyry Management Consulting Oy

93

Metsä Group

Metsä Board

100 200 300 400 500 600 Others SCA Mondi BillerudKorsnäs Metsä Board Smurfit Kappa

White T

• p Kraftliner and Fully Bleached Kraftliner Capacities

in Europe BIG-5 = 97% of total

Capacity: tons/year (thousand) 28% 27% 17% 14% 11%

Source: Metsä Board, Pöyry Management Consulting Oy

94

3%

Metsä Group

Metsä Board

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 = 58% of total

14% 12% 12% 10% 8% 4% 3% 3% 29% Capacity: tons/year (thousand)

Source: Pöyry Management Consulting Oy

95

Metsä Group

Metsä Board

Thank You!

www.metsaboard.com Juha Laine

Headof IR +358 10 4654335 juha.laine@metsagroup.com