Mets Board Investor presentation 1 3/2018 3 May 2018 Contents - - PowerPoint PPT Presentation

Metsä Board

Investor presentation 1–3/2018

3 May 2018

Investor presentation 1–3/2018 2

Contents

Investment highlights 3 Strategy and financial targets 15 Operating environment and market position 23 Growth in the paperboard business 32 Results for Q1 2018 39 Credit update 50 Production, capacities and sourcing 56 Product development focus areas 63 Sustainability 69 Shares and owners 75 Appendix 78 Contact information 86

Investment highlights

• A pure-play paperboard company focused on premium fresh

fibre paperboards

• Strong market position:

– #1 in folding boxboard and white kraftliners in Europe – #1 in coated white kraftliners globally

• Global megatrends – population growth, urbanization and

sustainability – are driving the demand for ecological packacing

• A growth company with good profitability
• Self-sufficiency in pulp

Investor presentation 1–3/2018 4

Investment highlights

Folding boxboard 53% White kraftliners 27% Market pulp 18% Others 3%

Sales split in 2017

EMEA 72 % Americas 19 % APAC 9 %

Sales split by region in 2017

Global sales to over 100 countries from 8 production units in Finland and Sweden

Increased shareholder value and steadily growing dividend

Enterprise value, EUR million

500 1000 1500 2000 2500 3000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net debt Market capitalization

Dividend and payout ratio %

0% 15% 30% 45% 60% 75% 90% 0,00 0,04 0,08 0,12 0,16 0,20 0,24 2012 2013 2014 2015 2016 2017 Dividend, EUR Dividend/EPS, %

5 Investor presentation 1–3/2018

EUR mill. EUR

Folding boxboards

Packaging solutions for consumer goods

Food service boards

Solutions for food service

White kraftliners

Retail-ready tray and point-of-sale solutions

Metsä Board’s lightweight premium paperboards

Roughly 50% of Metsä Board’s folding boxboard sales in Europe is negotiated directly with brand owners

7

Metsä Board has a broad customer base

BRAND OWNERS FOLDING BOXBOARD WHITE LINERBOARDS MERCHANTS CORRUGATED BOX MANUFACTURERS CONVERTERS

Investor presentation 1–3/2018

Customers benefit from Metsä Board’s paperboards

Lightweightness

– Metsä Board’s folding boxboard can be up to 30% lighter compared to competing grades

Purity and product safety

– Fresh fibre paperboards do not include harmful substances which could be absorbed into foodstuff in food and food service packaging

Sustainability

– Major part of the energy the company uses is renewable and the wood used as raw material is fully traceable

Quality

– Only high-quality paperboards

Investor presentation 1–3/2018 8

Metsä Board’s folding boxboards are produced from BCTMP or mechanical pulp, which is used in the middle layer (3) to make the board bulky and light. The two outer fibre layers (2 and 4) are made of chemical pulp, which maximizes the strength of the board. Coating layers (1) can be one or several and on top or both sides.

9

Three-layer structure makes the board light while maintaining the stiffness

Investor presentation 1–3/2018

Strong profitability development

Comparable ROCE-%

Investor presentation 1–3/2018 10

Comparable EBIT-%

9,1 11,3 8,1 11,2 15,8

2 4 6 8 10 12 14 16

2 4 6 8 10 12 14 16 2014 2015 2016 2017 Q1/2018 %

6,8 9,0 8,0 10,5 14,0

2 4 6 8 10 12 14 16 2014 2015 2016 2017 Q1/2018 %

Target over 12%

Year 2016 profitability was burdened by the ramp-up of Husum’s folding boxboard machine

11

Potential to improve profitability of Husum

At least EUR 100 million EBIT improvement from 2016 to 2019

2016 2019

+ EUR

25 million

+ EUR

5 million

+ EUR

>70 million

120,000 tonnes

• f pulp

production lost in 2016

Restructuring:

Efficiency improvement programme FBB capacity utilisation rate >95% with normal sales price*

Investor presentation 1–3/2018

* The sales price improvement in Euros is currently being delayed by the weakened US dollar.

Investor presentation 1–3/2018 12

Improvement in productivity over time

1 000 1 200 1 400 1 600 1 800 2 000 2 200 1 000 1 300 1 600 1 900 2 200 2010 2011 2012 2013 2014 2015 2016 2017 2018E

Production capacity tn/employee Personnel at current mills Production capacity (tonnes) / employee at current mills

Personnel at current mills Production capacity tn / employee

Estimated capex for 2018 is EUR 70 million

30 60 90 120 150 180 2010 2011 2012 2013 2014 2015 2016 2017 2018E Maintenance capex Growth capex Depreciation

EUR million

13 Investor presentation 1–3/2018

Main growth in capex in 2015−2016: Husum investment programme, extrusion coating line and equity investment in Metsä Fibre’s bioproduct mill

• High investment costs
• Limited availability of high yield pulp (BCTMP)
• Global brand owners and manufacturers for corrugated

products not willing to change paperboard suppliers easily in the high-quality segments

– High speed packaging lines very quality sensitive – Requirements for unified brand look and feel globally – Sustainability and product safety aspects

• Skilled people and organizations a crucial success factor

Investor presentation 1–3/2018 14

High threshold for new producers to enter high-quality paperboard segment

Strategy and financial targets

Values

• Responsible profitability
• Reliability
• Cooperation
• Renewal

Strategic cornerstones

• Focus
• Growth
• Profitability

Metsä Board’s vision is to be the preferred supplier

• f premium paperboards creating value for

customers globally

Investor presentation 1–3/2018 16

Focus on premium fresh fibre paperboards for consumer and retail packaging This means to us:

• We focus on serving customers whose quality

expectations require our high quality, light and strong packaging materials

• Our paperboards are produced from fresh fibres
• Our products are used for packages at the store and

from the store to the consumer

Investor presentation 1–3/2018 17

Strategic cornerstones

Focus

Profitability is based on superior cost efficiency and healthy sales prices driven by high-quality pulps and unique technical know-how This means to us:

• Our superior cost efficiency will be achieved by further

developing productivity and efficiency of our mills,

• perations and people
• We will continue to drive down purchasing costs in all

areas

• Our self-sufficiency in high-quality pulps together with

unique paperboard making expertise helps us to improve

• ur market position further and maintain healthy price

levels

Investor presentation 1–3/2018 18

Strategic cornerstones

Profitability

Grow profitably together with brand owner, converter and merchant customers globally in businesses that benefit from our safe and sustainable paperboards This means to us:

• We grow in end-uses where our product is best suited to

protecting our customers’ products and promoting their brands and businesses

• Our customer base is global, including brand owner,

private label, converter and merchant customers

• By selecting businesses that benefit from our paperboards

we can generate value for our customers and grow profitably with them

Investor presentation 1–3/2018 19

Strategic cornerstones

Growth

Financial targets and actuals in 2017

Comparable ROCE, %

6.4 9.1 11.3 8.1 11.2 2013 2014 2015 2016 2017 2.9 1.8 1.2 2.0 1.2 2013 2014 2015 2016 2017

Net debt / comparable EBITDA, %

7% 10% 13% 12% 15% 2013 2014 2015 2016 2017

Annual growth in paperboard deliveries, %

Target is to grow

• ver the average

3-4% market growth Target: >12% Target: <2.5

20

Dividend policy: Target is to distribute at least 50% of the result for the financial period

Investor presentation 1–3/2018 20

• Grow the paperboard businesses profitably globally
• Ensure successful sales of new capacity
• Secure good price levels
• Keep best in class product quality and improve supply chain
• Develop new products for existing and new end uses
• Continue productivity improvements and cost savings

Investor presentation 1–3/2018 21

Main priorities and actions to achieve financial targets

• Metsä Board’s dividend payout target

is at least 50 per cent of the result for the financial period

• Dividend for 2017:

– EUR 0.21 per share – Totalling EUR 75 million – Corresponds to 50 per cent of EPS

0,00 0,10 0,20 0,30 0,40 0,50 2013 2014 2015 2016 2017

EPS and DPS, EUR

Earnings per share Dividend per share

Investor presentation 1–3/2018 22

Dividend and EPS

Operating environment and market position

Global trends driving growth in sustainably packaging

Investor presentation 1–3/2018 24

• Urbanization
• Growing consumption
• Stronger demand for ecological

packaging

• Greater significance of resource

efficiency

• Increasing regulation
• Social responsibility throughout the

value chain

The global paperboard packaging market is about USD 300 billion

The total packaging market is USD 850 billion

Paperboard packaging Other wood fibre based packaging Non-fibre based packaging

Investor presentation 1–3/2018 25

Average annual growth rate of paperboard packaging USD 300 bn

USD bn

Source: Smithers Pira

50 100 150 200 250 300 350 400 2012 2013 2014 2015 2016 2017 2022F + 3% per year 2017-2022

Annual global demand for cartonboard* is 38 million tonnes

• f which folding boxboard is about 10 million tonnes

Investor presentation 1–3/2018 26 Source: Metsä Board estimates

*Excluding liquid packaging board, cup & plate stock,

liner and uncoated recycled board.

APAC

20 Mt/a

EMEA

9 Mt/a

North America

7 Mt/a

Lat.Am.

2 Mt/a

Folding boxboard Other fresh fibre grades

(e.g. SBS, CUK)

Recycled grades

• Avg. demand growth rate

for folding boxboard is 3–4% per year

27

Global food service board* market is 3.5 Mt/a

* Base board (e.g. SBB or FBB) only, excl. other

laminate materials such as aluminium and PE.

Cups Plates Cartons

APAC

1.0 Mt/a

EMEA

0.9 Mt/a

Americas

1.6 Mt/a

• Avg. growth rate for food

service board is 3–5%/a

Source: Metsä Board estimates Investor presentation 1–3/2018

Annual global demand for white linerboard is 11 million tonnes

Demand for white kraftliners is 4.5 million tonnes and for white coated kraftliners 1 million tonne

Investor presentation 1–3/2018 28

Source: Metsä Board estimates

Americas

3 Mt/a

Global demand for containerboards is 160 Mt/a, of which

• White linerboards 7%
• Brown kraftliner 17%
• Brown testliner 37%
• Fluting 39%

Americas

3 Mt/a

EMEA

5 Mt /a

APAC

3 Mt/a

White uncoated kraftliner White coated kraftliner White recycled liner

• Avg. demand growth rate

for white kraftliner is 3–4% per year

Metsä Board has a strong position in Europe

Largest Folding Boxboard Producers in Europe Total capacity: 3.8M tonnes

18% 7% 9% 10% 21% 35% 300 600 900 1200 1500

Others International Paper Mayr-Melnhof Kotkamills Oy Stora Enso Metsä Board

10% 8% 11% 14% 23% 33% 200 400 600 800

Others SCA BillerudKorsnäs Mondi Smurfit Kappa Metsä Board

Investor presentation 1–3/2018 29

Largest White Fresh Fibre Linerboard Producers in Europe Total capacity: 2.2M tonnes

Source: Metsä Board estimates

500 600 700 800 900 1000 1100 1200 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Folding Boxboard White-top kraftliner

Investor presentation 1–3/2018 30

Market price development in folding boxboard and white-top kraftliner in Europe

EUR/ tn

Sources: RISI, Inc. & FOEX Indexes Ltd

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

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

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

Source: Foex Indexes Ltd

Softwood, USD Softwood, EUR Hardwood, EUR Hardwood, USD

USD EUR

Pulp price development (PIX)

Investor presentation 1–3/2018 31

Metsä Board’s growth in the paperboard business

Investor presentation 1–3/2018 33

Metsä Board operates in growing paperboard market

Annual global demand growth for folding boxboard and white kraftliners is estimated to be 3–4%

5-YEAR GROWTH FORECAST EMEA Americas APAC

Folding boxboard (FBB) Food service board (FSB) Coated white kraftliner Uncoated white kraftliner Other fresh fibre paperboards (e.g. SBS, CUK) Recycled paperboards (e.g. WLC)

+2%/a or more +1 to +2%/a

• 1 to +1%/a
• 1 to -2%/a
• 2%/a or more

Source: Metsä Board estimates Metsä Board’s focus area

Metsä Board’s growth clearly exceeds average market growth

34

500 1 000 1 500 2 000

2013 2014 2015 2016 2017 2018 target Kraftliner Folding boxboard

Metsä Board’s annual paperboard deliveries

1,000 tonnes

Investor presentation 1–3/2018

Annual global demand growth for folding boxboard and white kraftliners is estimated to be 3–4% Source: Metsä Board´s own research

Investor presentation 1–3/2018 35

Most important growth area is Americas

In 2017, total deliveries to Americas grew by 23% year-on-year

50 100 150 200 250 300

2011 2012 2013 2014 2015 2016 2017 2018 target Folding boxboard Fresh fibre linerboard

300 200

1,000 tonnes

Actual and targeted deliveries to Americas

36

Metsä Board's regional goals

Americas, EMEA and APAC

GROWTH CONTINUES IN THE AMERICAS MAINTAIN THE STRONG MARKET POSITION IN EUROPE FOCUS ON PREMIUM PAPERBOARD SEGMENTS IN THE ASIA-PACIFIC REGION AMERICAS

SHARE OF SALES IN 2017

19% EMEA

SHARE OF SALES IN 2017

72% APAC

SHARE OF SALES IN 2017

9%

Investor presentation 1–3/2018

37

GROWTH CONTINUES IN THE AMERICAS MAINTAIN THE STRONG MARKET POSITION IN EUROPE FOCUS ON PREMIUM PAPERBOARD SEGMENTS IN THE ASIA-PACIFIC REGION AMERICAS

SHARE OF SALES IN 2017

19% EMEA

SHARE OF SALES IN 2017

72% APAC

SHARE OF SALES IN 2017

9 %

Investor presentation 1–3/2018

Metsä Board's growth drivers in Europe

EUROPE

• Metsä Board’s strengths are

based on long-standing customer accounts and a broad customer base

• Steady growth is sought

through a diverse selection of products and services focused

• n customer needs
• Stricter safety requirements

support demand for fresh fibre paperboards

38

GROWTH CONTINUES IN THE AMERICAS MAINTAIN THE STRONG MARKET POSITION IN EUROPE FOCUS ON PREMIUM PAPERBOARD SEGMENTS IN THE ASIA-PACIFIC REGION AMERICAS

SHARE OF SALES IN 2017

19% EMEA

SHARE OF SALES IN 2016

75 % APAC

SHARE OF SALES IN 2016

8 % AMERICAS

• Growth is driven by the limited local availability
• f premium lightweight folding boxboard and by

rapid growth in the demand for food service packaging made from fresh fibre paperboard

• The growth of discount store chains and online

commerce increases demand for premium white kraftliner

Investor presentation 1–3/2018

Metsä Board's growth drivers in Americas

Result for January–March 2018

• Rising market prices of paperboards fully compensated

unfavourable FX development

• Production and delivery volumes of paperboard and

market pulp increased

• No major maintenance shutdowns during the quarter
• Production efficiency of the mills was good
• Strong pulp market supported profitability
• S&P upgraded Metsä Board to investment grade

Investor presentation 1-3/2018 40

Q1 2018: The best quarter in years

Q1 2018 vs. Q4 2017

Increased sales and strong profitability development

Sales

EUR million

436 423 440 422 445 474 479 451 492 100 200 300 400 500 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 35 36 34 33 45 44 50 54 69

8,0 % 8,5 % 7,7 % 7,8 % 10,2 % 9,2 % 10,5 % 12,0 % 14,0 %

0% 4% 8% 12% 16% 20 40 60 80 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

Investor presentation 1–3/2018 41

Comparable operating result

EUR million and % of sales

FY 2016: EUR 1,720 million

EUR million EUR million

FY 2017: EUR 1,849 million FY 2016: EUR 138 million FY 2017: EUR 194 million

Total paperboard deliveries up by 40 000 tonnes compared to the previous quarter

227 250 266 245 265 304 299 276 297 142 148 148 143 163 173 170 152 171

100 200 300 400 500 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

White kraftliner Folding boxboard

1,000 tonnes

42 Investor presentation 1–3/2018

FY 2016: 1,568 tonnes FY 2017: 1,802 tonnes

Annual global demand growth for folding boxboard and white kraftliners is estimated to be 3–4%

Source: Metsä Board’s

• wn research

+15%

Paperboard delivery split in Q1 2018

Folding boxboard deliveries in Q1/18 (Q1/17) 1,000 tonnes

EMEA 205 (186) Americas 60 (52) APAC 31 (27) EMEA 122 (111) Americas 48 (47)

Investor presentation 1–3/2018 43

White kraftliner deliveries in Q1/18 (Q1/17) 1,000 tonnes

70% 20% 10% 72% 28%

Total FBB deliveries grew by 12% Total WKL deliveries grew by 5%

• Impacts of FX rate changes including hedges:

– Q1 2018 vs. Q4 2017: EUR 12 million negative – Q1 2018 vs. Q1 2017: EUR 15 million negative

• FX impacts will be small in Q2/2018 compared to Q1, further headwind in Q3
• Hedging policy: 50% of annual transaction exposure and 100% of balance sheet position

Weakened USD caused headwind in Q1

56 % 35 % 7 % 2 %

USD SEK GBP Other currencies

12 month transaction exposure EUR 1.09 billion FX sensitivities excluding hedges

10% strengthening of foreign currency vs. EUR will have an impact on Metsä Board’s EBIT of Currency Next 12 months USD, $ EUR +65 million SEK EUR -39 million GBP, £ EUR +7 million

44 Investor presentation 1–3/2018

0% 2% 4% 6% 8% 10% 12% 14% 16%

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18

Comparable ROCE-%, Quarterly

Investor presentation 1–3/2018 45

Q1/2018 ROCE nearly 16%

Target >12%

66

• 22
• 22

67 55 26 37 68 106 30 8

• 76
• 72

49 17 7 25 59 79 20

• 100
• 50

50 100 150 200 250

• 100
• 50

50 100 150 200 250 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18

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

EUR million

46 Investor presentation 1–3/2018 Free cash flow = Cash flow from operations - investments

Cash flow from operations EUR 241 million

(Rolling 12 months)

412 541 488 464 458 495 437 358 335 1,5 2,1 2,1 2,0 1,9 2,0 1,7 1,2 1,1

0,0 0,5 1,0 1,5 2,0 2,5 3,0 100 200 300 400 500 600 3/2016 6/2016 9/2016 12/2016 3/2017 6/2017 9/2017 12/2017 3/2018 Net debt, EUR million Net debt to comparable EBITDA

Investor presentation 1–3/2018 47

Strong financial position, leverage at 1.1x

Net debt/EBITDA target level <2.5

EUR million

Investor presentation 1–3/2018 48

Near-term outlook

• Good demand in fresh fibre paperboards, market

prices are expected to be stable or rising

• Total paperboard delivery volumes are expected

to increase slightly in Q2 2018 compared to Q1

• Several maintenance shutdowns at Finnish mills

in Q2

• Negative impact from weakened USD against

EUR will continue

• FY 2018 production costs estimated to rise

Metsä Board’s comparable operating result in the second quarter of 2018 is expected to weaken compared to the first quarter of 2018.

Investor presentation 1–3/2018 49

Result guidance for Q2 2018

Credit update

Debt structure and liquidity

31 March 2018 308 164 95 9 41

Bonds Loans from financial institutions Pension loans Finance leases and

• ther loans

Other short-term loans

279 100 134

Cash and cash equivalents Revolving credit facility Unraised pension loans

Interest-bearing debt, total EUR 617 million Available liquidity, total EUR 513 million

Average maturity of long-term loans on 31 March 2018 was 5.1 years.

51 Investor presentation 1–3/2018

* Of which EUR 248 million due 2027

and EUR 60 million due 2019

*

50 100 150 200 250 2018 2019 2020 2021 2022–26 2027 Bonds Loans from financial institutions Pension loans Other loans

Investor presentation 1–3/2018 52

Debt maturity

31 March 2018

Interest-bearing debt maturity profile 31 March 2018 EUR million

• Total interest-bearing debt on 31 March was

EUR 617 million (31 Dec 2017: EUR 577 million)

• In 2017, Metsä Board issued new 10-year

EUR 250 million bond with 2.75% annual coupon

Rating agency Rating and

• utlook

Last update Standard & Poor‘s BBB- stable 02/2018 Upgrade from BB+ Moody‘s Ba1 positive 04/2018 Upgrade from stable outlook

Metsä Board’s credit ratings

Investor presentation 1–3/2018 53

Financial costs January–March 2018

39 32 31 36 8

4,2 3,8 3,3 3,3 3,0

2,0 2,5 3,0 3,5 4,0 4,5 5,0 10 20 30 40 50 2014 2015 2016 2017 Q1/2018

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

• Net financial costs (including

foreign exchange differences) in 1–3/2018 were EUR 8 million (1–3/17: EUR 5 million)

Investor presentation 1–3/2018 54

Debt programmes 31 March 2018

Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity EUR 250 million bond issued 2017 250 250 2.8 2027 EUR 225 million bond issued 2014 60 60 4.4 2019 Syndicated credit facility 2014 250 150 2.7 2020 EUR 14 million bilateral loans 14 14 0.7 2018–2022 EUR 8 million finance leases 8 8 4.0 2018–2024 EUR 229 million pension loans 229 95 4.5 2018–2020 Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity Revolving credit facility 2014 100

• 2020

Pension loan facilities 229 95 4.5

• Short-term funding programmes

Metsä Group internal short-term limit 150

• 0–12 months

Metsä Group Treasury funding programmes EUR 150 million domestic CP programme 150

• 0–12 months

Metsä Board’s significant debt securities issued and outstanding at 31 March 2018

*) The average interest rate take into account outstanding interest rate swaps and amortised arrangement fees. The average interest rate of all Metsä Board interest bearing net liabilities incl. interest rate derivatives per 31 March 2018 is 3%.

Metsä Board’s principal long-term liquidity reserves at 31 March 2018

Investor presentation 1–3/2018 55

Metsä Board’s credit rating

Upgrade to Investment grade by S&P in Q1 2018

CCC+ / Caa1 B- / B3 B / B2 B+ / B1 BB- / Ba3 BB / Ba2 BBB- / Baa3 BB+ / Ba1 CCC+ / Caa1 B- / B3 B / B2 B+ / B1 BB- / Ba3 BB / Ba2 BBB- / Baa3 BB+ / Ba1

Production, capacities and sourcing

Raw material Logistics Raw material Extrusion Raw material Paperboard Raw material Pulp

57

The integrated mill model improves efficiency and sustainability of the supply chain

• Certified wood resources
• Own deep water port
• Own pulp mill at the mill site
• Paperboard production (BM1)
• Extrusion coating line (EM1)

Raw material Raw material Metsä Board‘s Husum integrated mill

Investor presentation 1–3/2018

Investor presentation 1–3/2018 58

Metsä Board’s production units

Äänekoski Simpele Joutseno Tako Kyro Kaskinen Husum Kemi

Integrated mills

• Husum, Sweden

400,000 t/a folding boxboard 270,000 t/a white linerboard 730,000 t/a chemical pulp

• Kemi

420,000 t/a white linerboard 620,000 t/a chemical pulp by Metsä Fibre

• Äänekoski

240,000 t/a folding boxboard 1,300,000 t/a chemical pulp by Metsä Fibre

• Joutseno

330,000 t/a BCTMP 690,000 t/a chemical pulp by Metsä Fibre

Non-integrated mills

• Kyro (Kyröskoski)

190,000 t/a folding boxboard

• Simpele

290,000 t/a folding boxboard

• Tako (Tampere)

210,000 t/a folding boxboard

• Kaskinen

340,000 t/a BCTMP Taking into account Metsä Group‘s pulp production, Metsä Board‘s pulp balance in 2018 is over 500,000 t/a long

Investor presentation 1–3/2018 59

Paperboard capacity

Town Country Machines Folding boxboard White fresh fibre linerboard Total Tampere (Tako) Finland 2 210 210 Kyröskoski (Kyro) Finland 1 190 190 Äänekoski Finland 1 240 240 Simpele Finland 1 290 290 Kemi Finland 1 420 420 Husum Sweden 2 400 270 670 Total 8 1,330 690 2,020

Investor presentation 1–3/2018 60

Pulp capacity

Metsä Board pulp mills Country Chemical pulp BCTMP Total

Husum Sweden 730 730 Joutseno Finland 330 330 Kaskinen Finland 340 340 Total 730 670 1,400

Metsä Fibre pulp mills Country Chemical pulp BCTMP Total

Äänekoski Finland 1,300 1,300 Kemi Finland 620 620 Rauma Finland 650 650 Joutseno Finland 690 690 Total 3,260 3,260

Own generation 22% Through PVO shareholding 29% Purchased energy 46% Outsourced generation 3% Wood- based 52% Nuclear power 28% Gas 8% Coal 4% Peat 4% Oil 2% Wind + solar 0% Hydro 0% Sweden 40% Finland 32% Baltic countries 17 % Russia 12%

Sourcing 2017

Electricity sourcing (total 2,440 GWh)

Investor presentation 1–3/2018 61

Primary energy used (total 12.0 TWh) Wood sourcing by country (total 5.4 million cubic metres)

Wood 26% Logistics 16% Chemicals, pigments and fillers 14% Energy 12% Other variables 3% Personnel 14% Other fixed 15%

62

Metsä Board’s cost structure

• Total costs in 2017 were EUR 1.6 billion –

30% fixed and 70% variable costs

• In 2018, the general cost inflation is expected

to accelerate Wood sourcing by country in 2017 Pulpwood roadside prices in Finland

Metsä Board (total 5.4 million m3)

• Sweden 40%, Finland 32%, Baltic countries 17%, Russia 11%

Metsä Fibre pulp mills (total 16.0 million m3)

• Finland 93%, Russia 4%, Baltic countries 3%

Source: Luke

€/m3

Investor presentation 1–3/2018

Product development focus areas

Key product development focus areas

Improved BCTMP Microfibrillated cellulose (MFC) Strength additives

Sustainable lightweighting

Dispersion barriers Bio-based raw materials

Barrier board

PE extrusion coated products

Investor presentation 1–3/2018 64

Lighter-weight paperboards: Better with Less

Metsä Board lightweight paperboard Average FBB – Folding boxboard SBB – Solid bleached board WLC – White lined chipboard

Investor presentation 1–3/2018 65

The weights equal to a print job of 30 000 sheets on a standard size printing press

66

Barrier boards types

NON-RENEWABLE BIODEGRADABLE RENEWABLE NON-BIODEGRADABLE Metsä Board’s baseboard is biobased, bio- degradable and compostable. Biobased, biodegradable coating, i.e. starch, PLA etc. Oil-based, biodegradable coating Bioplastic coating, i.e. green PE Latex based dispersion coating PE extrusion coating

Investor presentation 1–3/2018

Metsä Board barrier boards roadmap

Biobased barrier Non biobased barrier

Outsourced PE extrusion coating Own PE extrusion coating Biobased barrier Biobased light barrier

2016 2017 2018

Investor presentation 1–3/2018 67

• Biobased, fully recyclable and biodegradable

paperboard

• Developed especially for food service use with

short food contact time and when light grease resistance is sufficient

• Metsä Board continues to develop other barrier

solutions, and is investigating the utilization of dispersion and biobased coatings, and their commercial potential

Investor presentation 1–3/2018 68

Metsä Board launched an innovative eco-barrier paperboard

Sustainability

Metsä Board’s commitment to sustainable business is widely recognized by CDP and EcoVadis, among others. In Q1/2018 CDP included Metsä Board

• n both its Supplier Climate A and

Supplier Water A lists. Metsä Board is the only Finnish company on these lists and globally the only forest industry company on the Supplier Climate A list.

Sustainability is a significant part of Metsä Board’s core operations

Investor presentation 1–3/2018 70

Pure paperboard helps to store the packaged product safely.

The circular economy of a durable and safe package

Durable paperboard protects the packaged product effectively. Our paperboards are recyclable and biodegradable, or they can be used for energy production. We follow good manufacturing principles (GMP). All of our products meet the requirements of relevant international legislation. Fresh fibre is a pure and safe, renewable raw material. We only use carefully selected and safe raw materials in our products.

Rain waters the forest

Bark is utilised as a bio-energy source Metsä Board’s board production is mostly integrated in pulp production Waste waters are always carefully cleaned before returned back to the waterways Also lakes and seas are a source of recreation Light weight boards are resource efficient both for us as well as for

• ur customers

99% of water used in the production process is returned back to the waterways Metsä Board’s paperboards can be recycled, depending upon local recycling services Forests are a source of recreation

Metsä Board uses water efficiently

Metsä Board has decreased its CO2 emissions by 45% since 2009 and the use of water by 14% since 2010 Metsä Board only uses surface water in its production

LOGISTICS

ENSURE THE SUSTAINAINABILITY OF MAIN LOGISTIC FLOWS PERFORMANCE 2016−2017

100% In the end of 2017, all 481

logistics partners included in the sustainability survey fulfilled Metsä Group’s sustainability criteria.

SAFETY AT WORK

LOST-TIME ACCIDENTS FREQUENCY ANNUALLY PERFORMANCE 2017

• 28.4%
• 10%

ENERGY

ENERGY EFFICIENCY IMPROVEMENT 2009−2020 PERFORMANCE 2017 10.2%

12%

• 17%

RESOURCE EFFICIENCY

PROCESS WATER USE PER PRODUCT TONNE 2010−2020 PERFORMANCE 2017 -17%

Metsä Board’s sustainability targets

>80% WOOD

THE SHARE OF CERTIFIED WOOD PERFORMANCE 2017 80%

• 30%

CLIMATE

FOSSIL CO2 EMISSIONS PER PRODUCT TONNE 2009−2020 PERFORMANCE 2017 -47%

<3% WELL-BEING

SICKNESS ABSENTEEISM PERFORMANCE 2017 3.9%

BIOENERGY SHARE OF TOTAL PURCHASED ENERGY 52%

EU Commission – Announced plans to regulate printed food contact materials (FCMs)

• n EU level

Food Contact Material legislation in Switzerland – Part of Swiss Food law – Recycled paper cannot be used as FCM, if direct contact with food products – Concentration limits of certain polyaromatic hydrocarbons micrograms/kg food has been set Draft German mineral oil regulation – 4th ordinance draft published in March 2017 – The draft focuses on mineral oil migration from recycled fibre based packaging materials to food

74

Increased regulation to ensure product safety

Investor presentation 1–3/2018

Shares and owners

Market cap and foreign owners

31 March 2018

Ownership distribution

31 March 2018

Market cap and ownership distribution

Metsä Board shares (METSB, METSA) are listed on Nasdaq Helsinki

4 8 12 16 20 24 500 1 000 1 500 2 000 2 500 3 000

2013 2014 2015 2016 2017 Q1/2018

Market cap, EUR million Share of foreign owners, %

41 % 20 % 18 % 21 %

Metsäliitto Cooperative Domestic institutional investors Domestic private investors Foreign owners

EUR million * Metsäliitto Cooperative has 61% of voting rights *

76

%

Investor presentation 1–3/2018

Investor presentation 1–3/2018 77

Ownership structure on 31 March 2018

41 % 21 % 18 % 11 % 4 % 2 % 3 %

Metsäliitto Cooperative Foreign owners* Households Public sector

• rganisations

Finance and insurance companies Non-profit

• rganisations

Other companies

61 % 14 % 11 % 8 % 3 % 1 % 2 %

Metsäliitto Cooperative Public sector

• rganisations

Households Foreign owners* Non-profit

• rganisations

Finance and insurance companies Other companies

Shares, % (total no. of shares 355,512,746) Votes, % (total no. of votes 1,036,618,704)

* incl. nominee registered

Metsä Board has two series of shares: 35,847,682 A-shares and 319,665,064 B-shares. A-share entitles to 20 votes and B-share entitle to 1 vote at a General Meeting.

Appendices

METSÄ TISSUE

Tissue and cooking papers

Sales:

EUR 1.0 billion

Personnel:

2,800

Metsäliitto Cooperative holding 100%

METSÄ WOOD

Wood Products

Sales:

EUR 0.5 billion

Personnel:

1,400

Metsäliitto Cooperative holding 100%

METSÄ FOREST

Wood Supply and Forest Services

Sales:

EUR 1.6 billion

Personnel:

850

Metsäliitto Cooperative holding 100%

Investor presentation 1–3/2018 79

METSÄ BOARD

Paperboard

Sales:

EUR 1.8 billion

Personnel:

2,350

Metsäliitto Cooperative holding 41.5%, 61.4% of votes

METSÄ FIBRE

Pulp and Sawn Timber

Sales:

EUR 1.9 billion

Personnel:

1,200

Metsäliitto Cooperative holding 50.1%, Itochu Corporation 25.0% Metsä Board 24.9%

METSÄ GROUP | Sales

EUR 5.0 billion |

Personnel 9,100

METSÄLIITTO COOPERATIVE | Group’s parent company

| Owned by 104,000 Finnish forest owners (consolidated)

Metsä Board is listed

• n the Nasdaq Helsinki

Investor presentation 1–3/2018 80

Metsä Board Corporate Management Team

Mika Joukio

CEO Chairman of CMT since 2014 MG employee since 1990 Share ownership: 326,631

Jussi Noponen

CFO Member of CMT since 2016 MG employee since 2000 Share ownership: 57,000

Sari Pajari

SVP, Marketing and Sales Member of CMT since 2011 MG employee since 2007 Share ownership: 60,000

Ari Kiviranta

SVP, Development Member of CMT since 2014 MG employee since 1993 Share ownership: 38,938

Harri Pihlajaniemi

SVP, Production Member of CMT since 2017 MG employee in 2001-2004 and since 2017 Share ownership: no ownership

Susanna Tainio

SVP, HR Member of CMT since 2015 MG employee since 2011 Share ownership: 32,853 Share ownerships are B-shares. MG = Metsä Group

• From 26 to 8 production units
• Paper capacity from 5 million tonnes to zero
• Paperboard capacity from 1.1 million tonnes to 2.0 million tonnes
• Major divestments incl. Graphic Papers and Map Merchants
• Paperboard (incl. market pulp) 100% of sales from 2017 onwards
• Major improvement in profitability and financial position

Today strong position and growing

• #1 producer of folding boxboard and white kraftliner in Europe
• #1 producer of coated white-top kraftliner globally
• Husum investment programme enabling significant growth steps

Investor presentation 1–3/2018 81

Restructuring to a pure-play paperboard company from 2005 onwards

Investor presentation 1–3/2018 82

4440 3236 2432 2605 2485 2108 2019 2008 2008 1720 1849 1,1

• 1,1
• 6,2

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

• 8,0
• 4,0

0,0 4,0 8,0 12,0 1000 2000 3000 4000 5000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Sales, EUR million Comparable EBIT-%

%

Sales and EBIT-% development

Investor presentation 1–3/2018 83

M&A activity 1997−2015

100 000 B2 shares in PVO

Acquisitions Divestments

Biberist Paper Mill UK Paper Modo Paper Zanders Chemicals Business Botnia Wood Corrugated Packaging MD Papier Metsä Tissue Albbruck Savon Sellu Forestia Kemiart Liners (53 %) 8% in Botnia PSM 9% in Botnia Carton plants Map 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 Rest of Reflex 0.5% in PVO 2012 7.3 % in Metsä Fibre 2013 2014 Alizay mill Lielahti real estate 2015 Gohrsmühle mill Simpele Mill

Year Divestiture Enterprise Value, EUR million

2015 Gohrsmühle mill in Germany neg. 2014 Lielahti real-estate 32 2013 Alizay property and other estates 22 2012 7.3% stake in Metsä Fibre 138 2012 0.5% stake in PVO 64 2011 Hallein 34 2009 Metsä-Botnia’s Uruguayan operations 300* 2008 Graphic Papers 750 2008 100,000 shares in PVO 80 2008 New Thames mill 82** 2007 Map Merchant Group 382 2007 Folding carton plants 60 2007 Botnia (9%) 240 2005 Botnia (8%) 164 2005 Savon Sellu 20 2005 Forestia (95%) 163 2004 Metsä Tissue 570 2002 Papierfabrik Albbruck 235 2001 MD Papier 300 2001 Noviant (19%) 41 3,679 Investor presentation 1–3/2018 84

Significant Divestments EUR 3.7 billion in assets divested since 2001

* Cash portion **Incl. pension liabilities

INVESTMENT, EUR

1.2 billion

ELECTRICITY, Wh/a

1.8 tera

WOOD USAGE, m3/a

6.5 million

ELECTRICITY SELF SUFFICIENCY

240 percent

CERTIFIED WOOD

90 percent

START UP

August 2017

METSÄ BOARD INVESTED EUR 24.9 MILLION IN EQUITY → COMPANY’S PULP BALANCE WILL GROW BY 200,000 TONNES/A.

CAPACITY, tonnes/a

1.3 million Metsä Fibre’s new Bioproduct Mill

85 Investor presentation 1–3/2018

Katri Sundström

Vice President, Investor relations Tel +358 400 976 333 katri.sundstrom@metsagroup.com www.metsaboard.com

86

Contact information

Investor presentation 1–3/2018