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Mets Board Corporation FY 2019 Results Presentation material 12 - - PowerPoint PPT Presentation

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Mets Board Corporation FY 2019 Results Presentation material 12 February 2020 COMPARABLE OPERATING TOTAL PAPERBOARD OPERATING RESULT CASH FLOW INVESTMENTS DELIVERIES Q4 2019 in summary 39.1 89.6 56.8 440,000 tonnes EUR million

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SLIDE 1

Metsä Board Corporation

FY 2019 Results

Presentation material

12 February 2020

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SLIDE 2
  • Strong cash flow
  • Paperboard delivery volumes slightly lower

due to seasonality, prices remained stable

  • In Europe, market pulp prices continued to

decline

  • Profitability supported by less maintenance

and lower production costs

  • First investments made in the renewal of

the Husum pulp mill

  • Board of Directors proposes a distribution
  • f EUR 0.24 per share for 2019

2019 Results 2

Q4 2019 in summary

COMPARABLE OPERATING RESULT

39.1

EUR million OPERATING CASH FLOW

89.6

EUR million PAPERBOARD DELIVERIES

440,000

tonnes TOTAL INVESTMENTS

56.8

EUR million

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SLIDE 3

3

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SLIDE 4
  • New ambitious sustainability targets for 2030
  • Several external recognitions, e.g. EcoVadis Gold

rating, position on the CDP Climate A-list

  • Improved FBB portfolio which saves resources and

reduces carbon footprint

  • New ecobarrier paperboard to replace use of plastic

2019 Results 4

Sustainability highlights from 2019

Developing low-carbon solutions according to the principles of the circular economy

More information and all targets at www.metsaboard.com/sustainability

ENERGY CONSUMPTION

+0.7%

PER PRODUCED TONNE, COMPARED TO 2018

PROCESS WATER CONSUMPTION

  • 11%

PER PRODUCED TONNE, COMPARED TO 2018

SHARE OF FOSSIL-FREE ENERGY

83%

Actuals in 2019:

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SLIDE 5

Total paperboard delivery volumes slightly down year-on-year

265 304 299 276 297 328 297 293 302 299 305 300 163 173 170 152 171 161 149 134 138 146 161 140

100 200 300 400 500

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

White kraftliner Folding boxboard

1,000 tonnes

5 2019 Results

1,000 tonnes FY 2018: 1,830,000 tonnes FY 2019: 1,791,000 tonnes

  • 2%

+3%

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SLIDE 6

Paperboard sales development by market area in 2019

2019 Results 6

EMEA 860,000 (844k) Americas 242,000 (252k) APAC 105,000 (119k)

FBB deliveries in 2019 (2018)

total 1,207,000 tonnes (1,215k)

71%

EMEA 385,000 (438k) Americas 190,000 (173k) APAC 9,000 (4k)

WKL deliveries in 2019 (2018)

total 584,000 tonnes (615k)

EMEA

  • Stable demand in FBB with rising price levels
  • Soft market situation in WKL in H1, demand picked

up during the summer. Slightly improved price levels year-on-year AMERICAS

  • Slightly lower delivery volumes in FBB with clearly

improved price levels. Stable market situation in WKL with increased delivery volumes APAC

  • Lower FBB delivery volumes

20% 9% 66% 33% FBB = Folding boxboard WKL = White kraftliner

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SLIDE 7

69 62 59 41 64 43 60 39 60 120 180 240 300 2018 2019

Higher paperboard prices supported 2019 sales, profitability burdened mainly by lower market pulp prices

Sales

EUR million 492 487 519 477 475 489 458 478 400 800 1200 1600 2000 2018 2019

7

Comparable operating result

EUR million and % of sales

EUR million EUR million

2019 Results

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

FY 2018: EUR 252 million 13.0% FY 2019: EUR 184 million 9.5% FY 2018: EUR 1,944 million FY 2019: EUR 1,932 million

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SLIDE 8

Our long-term financial targets aim for profitability and a strong balance sheet

Comparable ROCE: Target at least 12%

8.1 11.2 14.4 10.4 2016 2017 2018 2019 2.0 1.2 1.0 1.1 2016 2017 2018 2019

Net debt/comparable EBITDA: Maximum level 2.5x

> 12% < 2.5x

8 2019 Results

76 50 51 59 2016 2017 2018 2019

Dividend policy: Payout ratio at least 50% of net result

> 50%

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SLIDE 9

Market pulp price decline decelerating but coronavirus causes uncertainty

9

Pulp price (PIX) development in Europe and China

  • In 2019 European NBSK (USD) decreased by

16%, while Chinese prices dropped by 28%*. Some stabilisation especially for Chinese prices towards the end of the year

  • Strong Chinese consumption throughout 2019,

driven by the resurgence of paper and paperboard

  • production. Demand trend remains expanding. In

Europe, the trend remains rather weak

  • Global stock levels for both NBSK and BHK have

declined from the peak levels in the summer 2019

2019 Results

Long-fibre pulp, Europe Long-fibre pulp, China (net)

Source: Fastmarkets Foex USD/tonne USD/tonne

200 400 600 800 1 000 1 200 1 400 200 400 600 800 1 000 1 200 1 400 2013 2014 2015 2016 2017 2018 2019

*) calculated from the difference between the average yearly prices

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Main investments in growth and development 2014–2020E:

2020E Husum pulp mill renewal 2019 Husum pulp mill renewal, new sheeting line in Äänekoski 2018 New baling line in Kaskinen BCTMP mill: 30,000 new BCTMP capacity 2017 New extrusion coating line in Husum: 100,000 t/a PE coating capacity 2015–16 New folding boxboard production line in Husum: 400,000 t/a of FBB and linerboard production line conversion: 250,000 t/a of WKL

10

Total capex in 2019 roughly EUR 100 million

Husum pulp mill renewal will increase capex in the coming years

50 100 150 200 250 2014 2015 2016 2017 2018 2019 2020E Capex in growth and development Maintenance capex Depreciation

Capital expenditure and depreciation

EUR million

2019 Results

NOTE! Estimated investments in 2020 are provisional and dependent on the environmental permit process related to the Husum pulp mill renewal

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68 106 30 36 54 30 36 31 44 90 59 79 20 23 43

  • 3

29 13 26 37

  • 50

50 100 150 200 250

  • 50

50 100 150 200 250 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months

EUR million

11

Free cash flow = cash flow from operations − total investments

Strong operative cash flow in 2019

Q4 cash flow supported by release in working capital

EUR million

2019 Results

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SLIDE 12

Renewal of Husum pulp mill in Sweden

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SLIDE 13

Husum pulp mill renewal

2019 2020 2021 2022

Company expects to make the final investment decision New recovery boiler and turbine expected to be in operation Pre- engineering phase launched Company applies amendment to environmental permit

2019 Results 13

The renewal consists of two phases

Ø Create a solid foundation to increase paperboard capacity in the Husum integrate in the future Ø Secure cost efficient pulp and energy production Ø Enable the company to reach its ambitious target of fossil-free mills by 2030

Second phase: New fibre line. To be implemented during the 2020s after the first phase is fully completed First phase: New recovery boiler and turbine

First investments made

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SLIDE 14

Investment value

  • Investment value of first phase is EUR 320 million, divided over 2019–

2022

– In 2019 investments were EUR 21 million

Estimated impacts of the first phase

  • Self-sufficiency in electricity increases from 40% to over 80%*
  • Reduced amount of purchased oil
  • Lower maintenance capex and costs

– Reduced duration and extended intervals between planned shutdowns → Increased pulp and paperboard production

  • Annual cash flow improvement EUR 35 million, of which EUR 30 million

EBITDA improvement and EUR 5 million lower capex

  • Financing costs to increase EUR 2 million per year

2019 Results 14

Husum pulp mill renewal in figures

*) Annual increase in electricity production about 330 GWh,

resulting in cost savings at 2019 electricity prices of approximately EUR 12 million

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SLIDE 15

15

Near-term outlook

January–March 2020

  • Strikes in Finnish mills will have a negative

impact on operating result of approximately EUR 20 million, affecting mainly Q1 2020

  • Metsä Board’s paperboard delivery volumes will

be roughly at the same level as in Q4 2019

  • Paperboard prices expected to be stable, pulp

prices are not expected to decline

  • No major planned maintenance shutdowns

during Q1 2020

  • Stable production costs, prolonged mild winter

might increase wood costs

2019 Results

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SLIDE 16

Metsä Board’s comparable operating result for the first quarter of 2020 is expected to weaken compared to the fourth quarter of 2019 due to strikes at mills in Finland.

2019 Results 16

Result guidance for January–March 2020

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SLIDE 17
  • Q4 2019 development met the

expectations

  • First investments made to Husum pulp

mill renewal

  • Strikes in the Finnish mills will have a

negative impact on profitability in H1

  • Market outlook:

– Stable market situation for paperboard – Pulp prices are not expected to decline, but coronavirus is causing uncertainty

2019 Results 17

Summary

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SLIDE 18

Appendix

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SLIDE 19

2019 Results 19

Key financials

Q4/19 Q4/18 Change Q4/19

  • vs. Q4/18

FY 2019 FY 2018 Change 2019

  • vs. 2018

Sales

EUR, m

478 458 4% 1,932 1,944

  • 1%

EBITDA*

EUR, m

59 81

  • 27%

279 344

  • 19%

Operating result*

EUR, m

39 60

  • 35%

184 252

  • 27%

% of sales*

%

8.2 13.1 9.5 13.0 Metsä Fibre’s share of operating result*

EUR, m

1 32

  • 97%

43 124

  • 64%

Earnings per share

EUR

0.05 0.14

  • 64%

0.41 0.57

  • 28%

ROCE*

%

8.9 13.7 10.4 14.4 Capex (own assets)

EUR, m

54 34 59% 95 70 33% Cash flow from operations

EUR, m

90 30 195% 201 151 33% IB Net debt, at end of period

EUR, m

308 335

  • 8%

308 335

  • 8%

*comparable

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SLIDE 20

2019 Results 20

Comparable operating result

Q4 2019 vs. Q3 2019 and FY 2019 vs. FY 2018

Positive: + less annual maintenance + lower production costs + sale of emission rights Negative:

  • weakened market pulp prices
  • Metsä Fibre’s result share
  • lower paperboard delivery volumes

Positive: + higher prices in FBB and WKL + FX Negative:

  • weakened market pulp prices
  • Metsä Fibre’s result share
  • higher wood and raw material costs in paperboard and pulp

Comparable operating result

Q4 2019: EUR 39.1 million

(Q3 2019: EUR 42.5 million) Comparable operating result

FY 2019: EUR 184.4 million

(FY 2018: EUR 251.9 million)

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358 335 388 344 335 297 380 352 308

1,2 1,1 1,2 1,0 1,0 0,9 1,2 1,2 1,1

0,0 0,5 1,0 1,5 2,0 2,5 3,0 100 200 300 400 500 600 12/2017 3/2018 6/2018 9/2018 12/2018 3/2019 6/2019 9/2019 12/2019 Net debt, EUR million Net debt to comparable EBITDA (last 12 months)

21

Strong balance sheet at the year end

Net debt at EUR 308 million, leverage 1.1x

Net debt / EBITDA target level: <2.5 EUR million

2019 Results

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SLIDE 22

Impact including hedges, actual

– Q4 2019 vs Q3 2019: EUR +1 million – Q4 2019 vs Q4 2018: EUR +10 million – FY 2019 vs FY 2018: EUR +48 million

Expected impacts including hedges

– Q1 2020 vs Q4 2019: slightly positive – Q1 2020 vs Q1 2019: positive

Impacts from FX changes

USD 57% SEK 34% GBP 7% Other currencies 2%

Annual transaction exposure total EUR 1.1 billion FX sensitivities excluding hedges

10% strengthening of foreign currency vs. EUR would have an impact on Metsä Board’s EBIT of Currency Next 12 months USD, $ EUR +63 million SEK, kr EUR -39 million GBP, £ EUR +9 million

22 2019 Results

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SLIDE 23

Cost inflation accelerated in 2018 and costs remained at a high level in 2019

Q4 2019 vs. Q3 2019

Declined wood costs, lower pulp costs in the paperboard business

FY 2019 vs. FY 2018

Prices of raw materials remained high in

  • 2019. Wood costs were at a higher level

than the year before, but declined slightly towards the end of the year

Wood 28% Logistics 16% Chemicals 16% Energy 14% Personnel 12% Other fixed 14%

2019 Results 23

Metsä Board’s cost split in 2019 Metsä Board’s total costs in 2019: EUR 1.70 billion (2018: EUR 1.69 billion)

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4% 6% 8% 10% 12% 14% 16% Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19

Comparable return on capital employed, % Quarterly Rolling 12m Target

24

In 2019 comparable ROCE at 10.4%

Target level > 12%

2019 Results

R12m 10.4% Q4/19: 8.9%

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SLIDE 25

50 100 150 200 250 2020 2021-2024 2025 2027

Bonds Loans from financial institutions Pension loans Finance lease liabilities

2019 Results 25

Debt and its maturity

Long-term interest-bearing debt maturity profile as per 31 December 2019

EUR million

  • On 30 September, Metsä Board agreed on a new bank financing

facility consisting of a five-year term loan of EUR 150 millionand a five-year RCF of EUR 200 million to replace the drawn loan of EUR 50 millionand undrawn RCF of EUR 150 million

  • Interest-bearing debt on 31 December was EUR 445 million (31

Dec 2018: EUR 447 million)

Rating agency Rating and

  • utlook

Last update S&P Global BBB- stable 02/2018 Upgrade from BB+ Moody‘s Investor Services Baa3 stable 01/2019 Upgrade from Ba1 Metsä Board’s both credit ratings are investment grade

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SLIDE 26

2019 Results 26

Net financial costs in 2019 were EUR 15.4 million

32 31 36 22 15

3.8 3.3 3.3 3.3 2.5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 10 20 30 40 2015 2016 2017 2018 2019 Net financial costs, EUR million Average interest rate at the end of period, % EUR million %

  • Net financial costs, including foreign

exchange differences, in 2019 were EUR 15.4 million (FY 2018: 22.3)

  • Average interest rate on loans at the end of

review period was 2.5% and the average maturity of long-term loans was 6.4 years

  • No major differences in annual interest

payments after the new financial arrangements on 30 September 2019

  • Annual financial costs expected to increase

by EUR 2 million with the Husum pulp mill renewal

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Debt structure and liquidity on 31 December 2019

249 149 24 23

Bonds Loans from financial institutions Pension loans Finance leases and other loans

24 134 200 190

Cash and cash equivalents RCF, unraised Pension loans, unraised

Interest-bearing debt

EUR 445 million

Available liquidity

EUR 524 million Average maturity of long-term loans on 31 December 2019 was 6.4 years.

27 2019 Results

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Market cap and foreign owners

31 December 2019

Ownership distribution

31 December 2019

Market cap and ownership distribution

Metsä Board’s A- and B-shares are listed on Nasdaq Helsinki

5 10 15 20 25 500 1 000 1 500 2 000 2 500 3 000

12/2015 12/2016 12/2017 12/2018 12/2019

Market cap, EUR million Share of foreign owners, % Metsäliitto Cooperative 46% Domestic institutional investors 19% Domestic private investors 20% Foreign

  • wners

15%

EUR million

28

%

2019 Results

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External recognition and commitments

In ISS ESG Corporate Rating (previously oekom research Corporate Rating) Metsä Board has a Prime status. Metsä Board scored the Gold level in EcoVadis’ CSR ranking in 2019, and is included in the top 1% of companies assessed in the corrugated paper and paperboard industry. Metsä Board has been on the CDP Climate A List since 2016. In addition, Metsä Board scored A- in the CDP Water and Forest Programmes and in the Supplier Engagement Rating in 2019. Metsä Board as a part of Metsä Group is committed to the UN Global Compact corporate responsibility initiative and its principles in the areas of human rights, labour, environment and anti-corruption. Metsä Board also supports the UN’s Sustainable Development Goals, the SDGs. Metsä Board’s GHG emissions’ reduction targets are approved by the Science Based Targets initiative. In 2019, Metsä Board received a rating of AAA (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment. In December 2019 , Metsä Board received an overall ESG Risk Rating score of 17.6 and is considered by Sustainalytics to be at low risk of experiencing material financial impacts from ESG factors.

Link to MSCI Terms and Conditions

Metsä Board’s ESG performance was rated “Advanced” in Vigeo Eiris ESG assessment in July 2019.

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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

Folding boxboard White-top kraftliner

30

Price development of folding boxboard and white kraftliner in Europe

EUR/ tonne Sources: Fastmarkets RISI & Fastmarkets FOEX EUR/ tonne

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350 400 450 500 550 600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 1250 350 400 450 500 550 600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 1250

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Source: Fast Markets Foex

USD or EUR USD or EUR

31

Price development of pulp in Europe (PIX)

Long-fibre (SW) and short-fibre (HW) pulp

Long-fibre, USD

Long-fibre, EUR

Short-fibre, EUR Short-fibre, USD

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SLIDE 32

Price development of roadside pulpwood in Finland and Sweden

Pulpwood roadside prices in Finland, EUR/m3 Pulpwood roadside prices in Sweden*, SEK/m3

Sources: Luke (Natural Resources Institute Finland) and Skogsstyrelsen (The Swedish Forest Agency)

Investor presentation 1–12/2019

20 22 24 26 28 30 32 34 36 38 40 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Spruce Birch Pine 150 170 190 210 230 250 270 290 310 330 350 370 390 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Spruce Birch Pine

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FX rates development: EUR/USD and EUR/SEK

EUR/USD

1–12/2019 33

EUR/SEK

1,08 1,1 1,12 1,14 1,16 1,18 1,2 1,22 1,24 1,26

29.12.2017 29.1.2018 28.2.2018 31.3.2018 30.4.2018 31.5.2018 30.6.2018 31.7.2018 31.8.2018 30.9.2018 31.10.2018 30.11.2018 31.12.2018 31.1.2019 28.2.2019 31.3.2019 30.4.2019 31.5.2019 30.6.2019 31.7.2019 31.8.2019 30.9.2019 31.10.2019 30.11.2019 31.12.2019

9,6 9,8 10 10,2 10,4 10,6 10,8 11

29.12.2017 29.1.2018 28.2.2018 31.3.2018 30.4.2018 31.5.2018 30.6.2018 31.7.2018 31.8.2018 30.9.2018 31.10.2018 30.11.2018 31.12.2018 31.1.2019 28.2.2019 31.3.2019 30.4.2019 31.5.2019 30.6.2019 31.7.2019 31.8.2019 30.9.2019 31.10.2019 30.11.2019 31.12.2019

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