Mets Board Corporation Half-Year Financial Report JanuaryJune 2019 - - PowerPoint PPT Presentation

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Mets Board Corporation Half-Year Financial Report JanuaryJune 2019 - - PowerPoint PPT Presentation

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Mets Board Corporation Half-Year Financial Report JanuaryJune 2019 Presentation material Mets Board Corporation Half-Year Financial Report JanuaryJune 2020 Presentation material COMPARABLE OPERATING TOTAL PAPERBOARD DELIVERIES

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Metsä Board Corporation

Half-Year Financial Report January–June 2019

Presentation material

Metsä Board Corporation

Half-Year Financial Report January–June 2020

Presentation material

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SLIDE 2

H1 2020 Results 2

Q2 2020 in summary

COMPARABLE OPERATING RESULT

60

EUR million OPERATING CASH FLOW

72

EUR million PAPERBOARD DELIVERIES

458,000

tonnes TOTAL INVESTMENTS

43

EUR million

  • Paperboard demand was at a good

level, and prices remained fairly stable

  • All-time high production volume in

paperboards

  • Strong cash flow generation continued
  • Slower than expected environmental

permit process for the new recovery boiler at Husum pulp mill

  • Excellence Centre in Äänekoski was

completed

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SLIDE 3
  • Impacts on paperboard demand

– Increased demand in food, beverage and pharmaceutical packaging – Decreased demand in graphic end uses and luxury products packaging

  • Substantial precautionary measures in place ensuring

the safety of employees and business continuity

  • No impacts on production. Some of the planned

maintenance works in Q2 have been postponed to H2

  • Weakening of global economy hinders visibility and

may negatively impact Metsä Board’s profitability

H1 2020 Results 3

Covid-19 impacts on Metsä Board’s operations

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SLIDE 4

4

EXCELLENCE CENTRE

in Äänekoski, Finland Boosting the development

  • f new paperboard and

packaging solutions Metsä Board’s new

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SLIDE 5

Total paperboard delivery volumes increased

297 328 297 293 302 299 305 300 298 310 171 161 149 134 138 146 161 140 152 148

100 200 300 400 500

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020

White kraftliner Folding boxboard

1,000 tonnes

5 H1 2020 Results

1,000 tonnes FY 2018: 1,830,000 tonnes FY 2019: 1,791,000 tonnes Q2 2020 vs. Q2 2019: +3% H1 2020 vs. H1 2019: +3%

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SLIDE 6

Sales development by market area in H1 2020

H1 2020 Results 6

EMEA 434k (432k) Americas 132k (120k) APAC 42k (50k)

FBB deliveries in H1 2020 (H1 2019) total 608k tonnes (601k) 71%

EMEA 195k (183k) Americas 101k (97k) APAC 5k (4k)

WKL deliveries in H1 2020 (H1 2019) total 300k tonnes (284k)

EMEA

  • Strong demand for food and pharma packaging
  • Increased total delivery volumes
  • FBB prices stable, WKL prices slightly down from H1 2019

AMERICAS

  • Strong demand for food, beverage and pharma packaging;

growing e-Commerce boosting demand for WKL

  • Increased total delivery volumes
  • Higher FBB and WKL euro prices compared to H1 2019

APAC

  • Lower delivery volumes in FBB

22% 7% 65% 33%

FBB = Folding boxboard WKL = White kraftliners

2%

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SLIDE 7

All-time high quarterly production volumes with improved safety

  • All-time high paperboard production

volume in Q2 2020: 489,000 tonnes

  • Improved energy and material

efficiency of the mills reduced production costs

  • Improved safety in H1 2020:

– LTA1: 5.1 (FY 2019: 5.5) – TRIF: 6.8 (FY 2019: 10.2)

H1 2020 Results 7

LTA=Lost-time accident frequency per million hours worked TRIF=Total recordable injury frequency per million hours worked

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69 62 34 59 41 60 64 43 60 39 50 100 150 200 250 2018 2019 2020

FX and lower production costs improved profitability

Sales, quarterly

EUR million 492 487 472 519 477 473 475 489 458 478 500 1000 1500 2000 2018 2019 2020

8

Comparable operating result, quarterly

EUR million and % of sales

EUR million EUR million

H1 2020 Results

FY 2018 EUR 252 million margin: 13.0% FY 2019 EUR 184 million margin: 9.5% FY 2018 EUR 1,944 million FY 2019 EUR 1,932 million Operating result: H1 2020: EUR 94m H1 2019: EUR 103m Operating margin: H1 2020: 10.0% H1 2019: 10.7% Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales: H1 2020: EUR 945m H1 2019: EUR 964m

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  • Pulp prices (PIX) in H1 2020 vs H1 2019

– European NBSK (USD) decreased by 24%* – Chinese NBSK (USD) decreased by 17%*

  • Pulp demand supported by increased demand in tissue

and hygiene products, with reduced availability of recycled paper but weakened by a sharp decline in printing & writing paper consumption

  • In H2, the pulp supply will decrease due to

production curtailments announced by certain producers and several annual maintenance shutdowns

H1 2020 Results 9

Market pulp

Pulp price (PIX) development in Europe and China

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

Source: Fastmarkets Foex

USD/tonne *) calculated as the difference between half-year average prices

200 400 600 800 1 000 1 200 1 400 200 400 600 800 1 000 1 200 1 400 2014 2015 2016 2017 2018 2019 2020

USD/tonne

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Update on 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

H1 2020 Results 10

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 Foundation work for new recovery boiler started

  • Foundation work for the recovery boiler started in March 2020
  • The processing of the environmental permit has progressed slightly slower than expected
  • Metsä Board estimates that the new recovery boiler will start up in H1 2022 at the earliest
  • Investment value for the first phase EUR 320 million
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SLIDE 11

30 36 54 30 36 31 44 90 80 72 20 23 43

  • 3

29 13 26 37 50 34

  • 50

50 100 150 200 250 300

  • 50

50 100 150 200 250 300 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 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 development in operating cash flow continued

EUR million

H1 2020 Results

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Long-term financial targets

Comparable ROCE: Target at least 12%

11.2 14.4 10.4 10.7 2017 2018 2019 H1 2020 1.2 1.0 1.1 1.1 2017 2018 2019 H1 2020

Net debt/comparable EBITDA: Maximum level 2.5x

Target > 12% Target < 2.5x

12 12 H1 2020 Results

76 50 51 59 2016 2017 2018 2019

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

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13

Near-term outlook

July–September 2020

H1 2020 Results

  • Paperboard delivery volumes in Q3 are estimated to

decline from Q2. Price levels are expected to remain stable.

  • Profitability will be weakened by major planned

maintenance shutdowns, e.g. at the Kemi and Husum* integrate mills. Some smaller maintenance works have also been postponed from Q2 to Q3.

  • Metsä Board’s market pulp deliveries in Q3 are

expected to decline from Q2

  • Production costs are not expected to decline further

*shutdown in Husum in September-October

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SLIDE 14

Metsä Board’s comparable operating result for the third quarter of 2020 is expected to weaken compared to the second quarter of 2020.

H1 2020 Results 14

Result guidance for July–September 2020

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SLIDE 15
  • Our business has performed well during

the corona pandemic

– Good demand for Metsä Board’s pure and safe paperboards – High paperboard production volumes – Good profitability with strong cash flow generation

  • The extent of negative impacts of the

pandemic on global economy and Metsä Board’s business still difficult to estimate

H1 2020 Results 15

Summary

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SLIDE 16
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SLIDE 17

Appendix

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SLIDE 18

H1 2020 Results 18

Key financials

Q2/20 Q2/19 Change Q2/20

  • vs. Q2/19

H1/20 H1/19 Change H1/20

  • vs. H1/19

FY 2019 Sales

EUR, m

473 477

  • 0.8%

945 964

  • 2.0%

1,932 EBITDA*

EUR, m

87 68 + 27% 146 157

  • 7%

279 Operating result*

EUR, m

60 41 + 48% 94 103

  • 8%

184 % of sales*

%

12.8 8.6 10.0 10.7 9.5 Metsä Fibre’s share of

  • perating result*

EUR, m

1.6 15.6

  • 90%
  • 2.6

36

  • 107%

43 Earnings per share

EUR

0.15 0.10 + 43% 0.21 0.27

  • 23%

0.41 ROCE*

%

13.9 9.7 10.7 11.7 10.4 Total investments

EUR, m

43 18 + 142% 73 24 + 201% 99 Cash flow from operations

EUR, m

72 31 + 135% 152 67 + 127% 201 IB Net debt, at end of period

EUR, m

306 380

  • 20%

306 380

  • 20%

308

*comparable

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Metsä Board’s pure and safe paperboards are mainly used for consumer goods packaging and various retail needs

Folding boxboards, incl. food service boards

19

White kraftliners, coated and uncoated

Food and food service Other consumer goods (e.g. pharma, cosmetics) Graphic end-uses

Folding boxboard end uses*

Various retail needs (e.g. shelf-ready solutions, point-of- sale displays, fresh fruit boxes Other consumer goods (e.g. electronics) E-commerce

White kraftliner end uses*

*) all data is indicative and based on Metsä Board’s own estimates

H1 2020 Results

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H1 2020 Results 20

Comparable operating result

Positive: + lower production costs especially in paperboard business due to higher energy and material efficiency + lower raw material and energy costs + FX Negative:

  • strikes at Finnish mills
  • Metsä Fibre’s result share

Q2 2020 vs. Q2 2019

EUR 60 million vs EUR 41 million

Positive: + lower production costs in pulp and paperboard business + higher delivery volumes + FX Negative:

  • strikes at Finnish mills
  • weakened market pulp prices
  • Metsä Fibre’s result share

H1 2020 vs. H1 2019

EUR 94 million vs EUR 103 million

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50 100 150 200 250 2020 2021-2024 2025 2027

Bonds Loans from financial institutions Pension loans Finance lease liabilities

H1 2020 Results 21

Debt and liquidity

Maturity of interest-bearing debt

Total EUR 462 million

EUR million

30 June 2020

  • Total interest-bearing net debt was

EUR 306 million

  • Liquidity was EUR 353 million and

complementary items EUR 340 million

  • Liquid funds and investments of

EUR 153 million

  • Undrawn revolving credit facility

EUR 200 million, maturing in 2025

  • Metsä Group’s internal undrawn credit

facility of EUR 150 million and pension premium funds of EUR 190 million

Rating agency Rating and outlook Last update S&P Global BBB- / stable 02/2018 Moody‘s Investor Services Baa3 / stable 01/2019

Metsä Board’s credit ratings are investment grade

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  • Impact including hedges, actual

– Q2 2020 vs Q2 2019: EUR +10 million – H1 2020 vs H1 2019: EUR +18 million

  • Expected impacts including hedges

– Q3 2020 vs Q2 2020: neutral – Q3 2020 vs Q3 2019: positive

Impacts from FX changes

USD 56% SEK 35% 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 +61 million SEK, kr EUR -37 million GBP, £ EUR +8 million

22 H1 2020 Results

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Main investments in growth and development 2014–2020E:

2020E Husum pulp mill renewal, finishing area modernization at Kyro mill 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 kraftliner production line conversion: 250,000 t/a of WKL

23

Total capex in H1 2020 EUR 73 million

FY 2020 estimate EUR 200 million

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

H1 2020 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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358 335 388 344 335 297 380 352 308 306

1.2 1.1 1.2 1.0 1.0 0.9 1.2 1.2 1.1 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 6/2020 Net debt, EUR million Net debt to comparable EBITDA (last 12 months)

24

Strong balance sheet

Net debt at EUR 306 million, leverage 1.1x

Net debt / EBITDA target level: <2.5 EUR million

H1 2020 Results

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SLIDE 25

H1 2020 Results 25

Net financial costs in H1 2020 were EUR 7.5 million

31 36 22 15 8 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 2016 2017 2018 2019 H1 2020 Net financial costs, EUR million Average interest rate at the end of period, % EUR million %

  • Net financial costs, including foreign

exchange differences, in H1 2020 were EUR 7.5 million (H1 2019: 8.6)

  • Average interest rate on loans at the end of

the review period was 2.3% and the average maturity of long-term loans was 6.1 years

  • 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 30 June 2020

249 182 8 23

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

8 153 200

Cash and cash equivalents RCF, unraised

Interest-bearing debt

EUR 462 million

Available liquidity*

EUR 353 million

Average maturity of long-term loans on 30 June 2020 was 6.1 years.

26 H1 2020 Results

* Liquidity is complemented by Metsä Group’s internal undrawn short-term credit facility of EUR 150 million and undrawn pension loans of EUR 190 million

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27

Read more about our ambitious sustainable targets for 2030 on our webpage

H1 2020 Results

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External recognition and commitments to Metsä Board on its actions in sustainability

A ‘Prime’ status In ISS ESG Corporate Rating . ‘Platinum’ in EcoVadis’ CSR

  • ranking. Included in the top 1%
  • f companies assessed in the

manufacture of corrugated paper and paperboard and of containers of paper and paperboard industry. Metsä Board has been on the CDP Climate A List every year since 2016. Metsä Board has A- in the CDP Water and Forest Programmes and in the Supplier Engagement Rating. 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 emission reduction targets are approved by the Science Based Targets initiative. AAA in the MSCI ESG Ratings assessment (on a scale of AAA–CCC) An overall ESG Risk Rating score of 17.6 and at low risk of experiencing material financial impacts from ESG factors.

Link to MSCI Terms and Conditions

“Advanced” in Vigeo Eiris ESG assessment.

H1 2020 Results 28

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Market cap and foreign owners

30 June 2020

Ownership distribution

30 June 2020

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 6/2020

Market cap, EUR million Share of foreign owners, % Metsäliitto Cooperative 48% Domestic institutional investors 19% Domestic private investors 19% Foreign

  • wners

14%

EUR million

29

%

H1 2020 Results

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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 2020

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

H1 2020 Results

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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 20

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

H1 2020 Results

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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)

H1 2020 Results

150 170 190 210 230 250 270 290 310 330 350 370 390 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Spruce Birch Pine

32

20 22 24 26 28 30 32 34 36 38 40 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Spruce Birch Pine

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SLIDE 33

FX rates development: EUR/USD and EUR/SEK

EUR/USD

33

EUR/SEK

H1 2020 Results

1,05 1,07 1,09 1,11 1,13 1,15 1,17 1,19 10 10,2 10,4 10,6 10,8 11 11,2 11,4

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