Mets Board Corporation January March 2019 Results Presentation - - PowerPoint PPT Presentation

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Mets Board Corporation January March 2019 Results Presentation - - PowerPoint PPT Presentation

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Mets Board Corporation January March 2019 Results Presentation material 26 April 2019 Q1 2019 in summary Higher paperboard prices and delivery volumes supported profitability Good market situation in folding boxboard Weakened

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Metsä Board Corporation

January–March 2019 Results Presentation material

26 April 2019

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SLIDE 2
  • Higher paperboard prices and delivery

volumes supported profitability

  • Good market situation in folding boxboard
  • Weakened demand in white kraftliners –

especially in Europe

  • Average prices of market pulp declined but

delivery volumes picked up from low Q4

  • Fewer planned maintenance shutdowns

compared to other quarters

2

Q1 2019 in summary

Q1 2019 Results

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SLIDE 3

Total paperboard delivery volumes in Q1 slightly up from the previous quarter

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

100 200 300 400 500 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

White kraftliner Folding boxboard

1,000 tonnes

3 Q1 2019 Results

+3%

  • 6%

1,000 tonnes

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SLIDE 4

Increased sales with stable operating result

Sales

EUR million 492 519 475 458 487 100 200 300 400 500 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 69 59 64 60 62

14,0 % 11,4 % 13,4 % 13,1 % 12,7 % 0% 4% 8% 12% 16%

20 40 60 80 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

4

Comparable operating result

EUR million and % of sales

EUR million EUR million

1–12/2018: EUR 1,944 million 1–12/2018: EUR 252 million (13.0% of sales)

Q1 2019 Results

+6%

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SLIDE 5

0% 2% 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 Comparable ROCE-%, Quarterly

5

Q1 2019 ROCE was 14.4%

Target level > 12%

Q1 2019 Results

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SLIDE 6

FX impact, including hedges:

– Q1 2019 vs Q4 2018: EUR +6 million – Q1 2019 vs Q1 2018: EUR +11 million

Changes in FX had a positive impact on Q1 results

USD 56 % SEK 36 % GBP 6 % Other currencies 2 %

Annual transaction exposure total EUR 1.3 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 +70 million SEK, kr EUR -50 million GBP, £ EUR +8 million

6 Q1 2019 Results

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Production costs remained high

  • Production costs in Q1 2019

– Slightly higher compared to Q4 2018 – Clearly higher compared to Q1 2018

  • Wood prices increased in 2018 and

remained at a high level in Q1 2019

Wood 28 % Logistics 16 % Chemicals 15 % Energy 14 % Personnel 13 % Other fixed 14 %

Q1 2019 Results 7

Metsä Board’s cost split in 2018

  • incl. 24.9% share of Metsä Fibre’s costs

Total costs in 2018: EUR 1.7 billion (2017: EUR 1.6 billion)

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SLIDE 8

Chinese pulp market shows signs of recovery while European pulp prices continue to decline

8

Pulp price (PIX) development in Europe and China

  • Market pulp delivery volumes increased in

Q1 2019 from the low levels in Q4 2018 …

  • … but average selling price weakened
  • Price gap between Europe and China is

narrowing as Europe is declining and China has stabilized

  • In the long-term, pulp demand is supported

by

  • Limited new capacity in the coming years
  • Restrictions on recycled paper imports in

China

Q1 2019 Results

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

Source: Thomson Reuters Datastream/ Fastmarkets Ltd, Metsä BI

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26 37 68 106 30 36 54 30 36 7 25 59 79 2 23 43

  • 3

29

  • 100
  • 50

50 100 150 200 250

  • 50

50 100 150 200 250 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19

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

EUR million

9

Free cash flow = cash flow from operations − investments

Metsä Fibre’s dividend supported cash flows in Q1 2019

EUR million

Q1 2019 Results

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458 495 437 358 335 388 344 335 297 1,9 2,0 1,7 1,2 1,1 1,2 1,0 1,0 0,9

0,0 0,5 1,0 1,5 2,0 2,5 3,0 100 200 300 400 500 600 3/2017 6/2017 9/2017 12/2017 3/2018 6/2018 9/2018 12/2018 3/2019

Net debt, EUR million

10

Net debt decreased and leverage was at 0.9x

Net debt / EBITDA target level: <2.5

EUR million

Q1 2019 Results

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Improved FBB portfolio answers to increasing demands for sustainability, product safety and brand promotion

– Further opportunities for lightweighting – Enhanced visual properties – Industry-leading quality consistency – Improved supply security and availability

Enabled by our improved high-yield BCTMP.

Q1 2019 Results 11

Metsä Board renews its folding boxboard portfolio

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SLIDE 12

12

Near-term outlook

  • Paperboard delivery volumes in Q2 are

expected to stay roughly at the Q1 levels

  • FBB prices are expected to be stable
  • Weakened demand in kraftliners may have an

impact on the average sales price

  • Global pulp demand is expected to be stable
  • Neutral impact from FX and production costs in

Q2 vs. Q1

  • Several maintenance shutdowns in Finnish mills

during April–June

Q1 2019 Results

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SLIDE 13

Metsä Board’s comparable operating result in the second quarter of 2019 is expected to weaken compared to the first quarter of 2019.

13

Result guidance for April–June 2019

Q1 2019 Results

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Metsä Board: Husum Renewal of the pulp mill Metsä Fibre: Kemi New bioproduct mill Metsä Fibre: Rauma New pine sawmill line

Metsä Board and Metsä Fibre to launch pre-engineering phases for three major investments

The total size of the investments amounts to approximately EUR 2 billion

Metsä Board owns 24.9% of Metsä Fibre

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The aim is to further improve the competitiveness

  • f pulp and energy production and move towards

fossil-free production

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Investment in Husum pulp mill would enable the long-term development of the integrate

First phase: Investments in a new recovery boiler and a new turbine benefit the whole Husum integrate

– Reduced energy costs, improved reliability of production and decreased duration of maintenance – Self-sufficiency in electricity would increase to over 80%, and be entirely based on renewable biomass

Second phase: Replacing the old fibre lines with one new fibre line Cost efficient, long-term energy production solution will create a solid foundation to increase paperboard capacity in the future.

Q1 2019 Results

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Q1 2019 Results 17

Estimated time schedule for the renewal in Husum mill

2019 2020 2021 2022

Final investment decision expected to be made in Q4 2019, at the earliest

The size of the first phase investment is approximately EUR 300 million, divided between the years 2019–2022 Total annual production capacity of the pulp mill after the investment will remain at 750,000 tonnes

New recovery boiler and turbine in

  • peration

Roughly 24 months after the investment decision

First phase: Second phase:

Current two fibre lines in Husum pulp mill to be replaced by one new fibre line

During the 2020’s

Prefeasibility study on the renewal concluded

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New bioproduct mill* in Kemi, Finland

  • Size of the investment EUR 1.5 billion
  • Annual capacity 1.5 million tonnes of chemical pulp and

several other bioproducts

  • Final investment decision expected in the summer of 2020

New sawmill line in Rauma, Finland

  • Size of the investment EUR 200 million
  • Annual capacity 750,000 cubic meters
  • If realised, would be the most modern and efficient sawmill

line in the world

  • Final investment decision in the beginning of 2020

Q1 2019 Results 18

Metsä Fibre is planning two major investments

*) would replace the existing pulp mill in Kemi, with

annual capacity of 630,000 tonnes of chemical pulp

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

Comparable ROCE: At least 12%

9,1 11,3 8,1 11,2 14,4 2014 2015 2016 2017 2018 1,8 1,2 2,0 1,2 1,0 2014 2015 2016 2017 2018

Net debt/comparable EBITDA: Maximum level 2.5x

> 12% < 2.5x

19 19 Q1 2019 Results

57 44 76 50 51 2014 2015 2016 2017 2018

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

> 50%

Actual in Q1 2019: 14.4% Actual in 31 March 2019: 0.9x

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  • Good market situation in FBB but

weakening demand in WKL

  • Global pulp market is recovering, but

still uncertain in the short term

  • Enhanced position in premium

lightweight paperboards through improved product portfolio

  • Metsä Board and Metsä Fibre have

announced major capex plans

  • Profitability guides our future growth

20

Summary

Q1 2019 Results

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Appendix

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Q1 2019 Results 22

Key financials

Q1/19 Q4/18 Change Q4/18

  • vs. Q3/18

Q1/18 Change Q1/19

  • vs. Q1/18

FY 2018 Sales

EUR, m

487 458 +6% 492

  • 1%

1,944 EBITDA*

EUR, m

89 81 +10% 94

  • 5%

344 Operating result*

EUR, m

62 60 +3% 69

  • 10%

252 % of sales*

%

12.7 13.1 14.0 13.0 Result before taxes*

EUR, m

58 56 +4% 61

  • 5%

230 Earnings per share

EUR

0.17 0.14 +21% 0.15 +13% 0.57 ROCE*

%

14.4 13.7 15.8 14.4 Capex

EUR, m

6 34

  • 81%

10

  • 38%

70 Cash flow from operations

EUR, m

36 30 +20% 30 +20% 151 IB Net debt, at end of period

EUR, m

297 335

  • 11%

335

  • 11%

335 *comparable

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Paperboard delivery volumes in Q1 2019 vs. Q1 2018

Folding boxboard (FBB) deliveries in Q1 2019 (Q1 2018) 1,000 tonnes

EMEA 214k (205) Americas 65k (60) APAC 23k (31)

↑

EMEA 89k (121) Americas 49k (48) ↑

23

White kraftliner (WKL) deliveries in Q1 2019 (Q1 2018) 1,000 tonnes 71% 22% 8% 65% 35%

Total FBB deliveries 302,000 tonnes (Q1 18: 297,000) Total WKL deliveries 138,000 tonnes (Q1 18: 171,000)

↑ ↓ ↓

Q1 2019 Results

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Investments in growth 2011–2018:

2018 New baling line in Kaskinen BCTMP mill: 30,000 new BCTMP capacity New sheeting line in Äänekoski (to be in production 9/2019) 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 2011–12 Debottlenecking in Simpele, Äänekoski and Kyro mills: total 150,000 t/a of FBB

24

Capex in Q1 2019 was EUR 6 million

30 60 90 120 150 180

2011 2012 2013 2014 2015 2016 2017 2018 2019E

Maintenance capex Growth capex Depreciation Capital expenditure and depreciation

EUR million

Q1 2019 Results

Note! The planned investments announced on 26 April are not included in the 2019E capex

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50 100 150 200 250

2019 2020 2021 2022–26 2027 Bonds Loans from financial institutions Pension loans Other loans

Q1 2019 Results 25

Debt and its maturity

31 March 2019

Long-term interest-bearing debt maturity profile 31 March 2019

EUR million

  • Total interest-bearing debt on 31 March was EUR 395

million

  • In March, Company paid the remaining EUR 60 million of

its bond issued in 2014

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

Metsä Board has an undrawn revolving credit facility of EUR 150 million maturing in 2020

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Q1 2019 Results 26

Net financial costs January–March 2019

32 31 36 22 4

3,8 3,3 3,3 3,3 3,2

2,0 2,5 3,0 3,5 4,0 4,5 5,0 10 20 30 40 2015 2016 2017 2018 Q1 2019

Net financial costs, EUR million Average interest rate at the end of period, % EUR million %

  • Net financial costs, including foreign

exchange differences, in Q1 2019 were EUR 4 million (Q1 2018: 8 EUR million)

  • Average interest rate on loans at the

year end was 3.2% and the average maturity of long-term loans was 6.1 years

  • In March, Company paid the

remaining EUR 60 million of its bond issued in 2014

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Debt structure and liquidity on 31 March 2019

250 50 63

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

95 150 166

Cash and cash equivalents RCF, unraised Pension loans, unraised

Interest-bearing debt

EUR 395 million

Available liquidity

EUR 411 million Average maturity of long-term loans on 31 March 2019 was 6.1 years.

27 Q1 2019 Results

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Market cap and foreign owners

31 March 2019

Ownership distribution

31 March 2019

Market cap and ownership distribution

Metsä Board shares are listed on Nasdaq Helsinki

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

2014 2015 2016 2017 2018 3/2019

Market cap, EUR million Share of foreign owners, %

Metsäliitto Cooperative 41 % Domestic institutional investors 21 % Domestic private investors 19 % Foreign

  • wners

19 %

EUR million

28

%

Q1 2019 Results

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External recognition and commitments

Metsä Board was awarded “Prime” status in ISS-oekom corporate responsibility rating in May 2018. Metsä Board scored the highest recognition level “Gold” in EcoVadis’ CSR ranking in 2018, and is included in the top 1% of suppliers assessed across all categories. Metsä Board has been included on the CDP Water A List every year since 2015 and on the CDP Climate A List since 2016. In addition, Metsä Board has scored A- in the CDP Forest programme since 2015, and is included on the Supplier Engagement leader board in 2019 for its efforts to address climate change. 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 is committed to Science Based Targets to reduce its GHG emissions in line with the goal of the Paris Agreement. As a member of Pack2Go Europe Metsä Board is committed to the environmental, health and safety aspects within the on-the- go food and beverage packaging industry. Metsä Board received a rating of AAA (on a scale of AAA-CCC) in the MSCI ESG Ratings assessment in June 2018. Metsä Board has an overall ESG score of 86/100 and is considered a Leader in Sustainalytics’ assessment in May 2018.

Q1 2019 Results 29

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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

500 550 600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 1250 Source: Fastmarkets Foex

Long-fibre, USD

Long-fibre, EUR

Short-fibre, EUR Short-fibre, USD

Price development of pulp in Europe (PIX)

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

30 Q1 2019 Results

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600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

31

Price development of folding boxboard and white kraftliner in Europe

EUR/ tonne Sources: Fastmarkets RISI & Fastmarkets FOEX

Folding boxboard White-top kraftliner

Q1 2019 Results

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Price development of roadside pulpwood in Finland and Sweden

Pulpwood roadside prices in Finland, EUR/m3

Q1 2019 Results 32

Pulpwood roadside prices in Sweden, SEK/m3

200 220 240 260 280 300 320 340 360 380 400

2010 2011 2012 2013 2014 2015 2016 2017 2018 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 –Spruce –Birch –Pine

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

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FX rates development: EUR/USD and EUR/SEK

EUR/USD

Q1 2019 Results 33

EUR/SEK

1,12 1,14 1,16 1,18 1,20 1,22 1,24 1,26

29.12.17 29.01.18 28.02.18 31.03.18 30.04.18 31.05.18 30.06.18 31.07.18 31.08.18 30.09.18 31.10.18 30.11.18 31.12.18 31.01.19 28.02.19

9,7 9,8 9,9 10,0 10,1 10,2 10,3 10,4 10,5 10,6 10,7

29.12.17 29.01.18 28.02.18 31.03.18 30.04.18 31.05.18 30.06.18 31.07.18 31.08.18 30.09.18 31.10.18 30.11.18 31.12.18 31.01.19 28.02.19

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