Metsä Group Q3 2018 results presentation

Metsä Group
Interim report Q3/2018
Ilkka Hämälä
President and CEO
8 November 2018

• Sales EUR 4,290 million (1–9/2017: EUR 3,712 million)
• Operating result* EUR 641 million (EUR 381 million)
• Operating result of sales* 14.9% (10.3%)
• Return on capital employed* 17.1 % (11.2%)
• Sales increased due to greater delivery volumes and higher
pulp and paperboard prices
• The result improved thanks to increase in pulp prices and
positive development of the paperboard business
• Exchange rate fluctuations had a negative effect of
approximately EUR 120 million on the operating result
compared to January–September of the previous year
8.11.2018 Metsä Group2
Excellent financial result
Metsä Group – Q3
*comparable

• The market prices of long-fibre and short-fibre pulp continued
to increase
• Production at Metsä Wood’s birch plywood mill in Pärnu began
• Bioproduct mill reached full production capacity in August
• Metsäliitto Cooperative made an early repayment of its EUR
56 million loan to the European Investment Bank
• Investments in tissue and cooking papers progressed
according to plan
• Juha Mäntylä was appointed COO of Metsäliitto Cooperative
and Esa Kaikkonen CEO of Metsä Tissue Corporation
• After review period, it was decided to build a demo plant to
manufacture new kind of pulp-based textile fibre at Äänekoski
8.11.20183
Events in the third quarter
Metsä Group – Q3

1,254 1,265
1,204
1,248 1,255
1,330
1,255 1,205
1,156 1,184 1,143 1,175 1,216 1,235 1,260
1,328
1,428
1,477
1,386
0
400
800
1 200
1 600
Sales quarterly
Metsä Group – Q3
EUR million

105
92
104
117
129
137
149
123
109
120
103 107
128
119
134
185
208 210
223
0
50
100
150
200
250
Q1/14 Q2 Q3 Q4 Q1/15 Q2 Q3 Q4 Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3
Metsä Group – Q3
EUR million
Comparable operating result

Change in comparable operating result
Metsä Group – Q3
EUR million
Comparable operating result 1–9/2017 381
Sales prices 462
Sales volumes 90
Exchange rates -121
Raw materials and energy -111
Employee costs -22
Maintenance and other fixed costs -8
Depreciation -33
Others 4
Comparable operating result 1–9/2018 641

Items affecting comparability
Metsä Group – Q3
EUR million 1–9/2018
Operating result (IFRS) 635.4
Items affecting comparability:
Metsä Board / Efficiency improvement programme at Husum mill -4.1
Metsä Board /Teollisuuden Voima divesting Meri-Pori coal-fired power plant -1.7
Metsä Board / other +0.2
Items total -5.6
Comparable operating result 641.0

Comparable ROCE
Metsä Group – Q3
11.1
14.2
10.5
11.2
17.1
0
5
10
15
20
1–9/2014 1–9/2015 1–9/2016 1–9/2017 1–9/2018
%
Target >10%

Equity ratio
Metsä Group – Q3
37.9
43.2 43.9 45.0
52.7
0
10
20
30
40
50
60
12/2014 12/2015 12/2016 12/2017 9/2018
%

Interest-bearing net liabilities
Metsä Group – Q3
938
610
1,033
993
622
0
300
600
900
1 200
1 500
12/2014 12/2015 12/2016 12/2017 9/2018
EUR million

Capital expenditure
Metsä Group – Q3
143
492
758
608
159
0
200
400
600
800
1–12/2014 1–12/2015 1–12/2016 1–12/2017 1–9/2018
EUR million
Full year
estimate

Personnel
Metsä Group – Q3
10,410
9,599 9,300 9,126 9,348
0
3 000
6 000
9 000
12 000
12/2014 12/2015 12/2016 12/2017 9/2018

Wood supply in line with the targets
• Wood was harvested according to targets, and
deliveries to customers were smooth
• Due to good harvesting and transport
conditions, the stocks of wood were at normal
levels
• Metsä Forest delivered a total of 27.2 million
cubic metres (23.7) of wood
• 35% of the wood was bought digitally. In the
sale of forest management services, the figure
was 41%
• At the beginning of June 2018 an advance
financing service for digital wood trade was
introduced
Sales and comparable operating result
Milj. euroa
Metsä Forest – Wood Supply and Forest Services
401
378
356
399
433
397
376
429
490 496
471
7.8
6.5
7.7
8.9 8.5
4.4
5.9
5.4
8.7
5.8
8.9
0
3
6
9
12
15
18
0
100
200
300
400
500
600
Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3
Sales Operating result

Wood products demand good except in the UK
• Sales of engineered wood products remained
unchanged, but the sales of the UK business
declined clearly
• Demand for engineered wood products in the main
markets remained strong, in particular the order
book levels of spruce plywood were higher than last
year
• Cost inflation, a decline in the profitability of the UK
business and the costs of new mills had a negative
effect on the result. Production-related challenges
were reflected in delivery volumes and result
• Production at Metsä Wood’s birch plywood mill in
Pärnu began officially at the end of August
EUR million
Metsä Wood – Wood Products Industry
121
130
115 115
120 122
110 108 109
119
106
8.2
13.2
9.0
8.3
10.7
8.4
7.6
6.9
6.2
5.5
2.8
0
3
6
9
12
15
0
30
60
90
120
150

Demand for pulp remained strong and prices
at a good level
• Increase in sales prices and increased pulp delivery
volumes as a result of the bioproduct mill improved
sales and operating result for January–September
• Market price of long-fibre and short-fibre pulp
increased by 34% and 33%, respectively, in
January–September compared to corresponding
period last year
• Delivery volumes of sawn timber decreased 11%
and market prices increased by 11% in January–
September
• Bioproduct mill in Äänekoski reached its full
production capacity in August
• Prefeasibility study on renewal of Kemi pulp mill
progressed as planned
EUR million
Metsä Fibre – Pulp and Sawn Timber
409 423
389
416 422 427
475
552
601
629
609
61
53 46 54 55
71 68
126
145
165
187
0
40
80
120
160
200
240
280
0
100
200
300
400
500
600
700

Price of pulp (PIX) 2010–Q3/2018
Metsä Fibre – Pulp and Sawn Timber
400
600
800
1000
1200
1400
400
600
800
1000
1200
1400
´10 ´11 ´12 ´13 ´14 ´15 ´16 ´17 ´18
Hardwood/EUR Pulpwood/EUR Hardwood/USD Pulpwood/USD
USD EUR
Source: Foex

Good development also in paperboard prices and volumes
• The sales and comparable operating result improved
due to the higher prices and delivery volumes of
paperboard and pulp
• Metsä Fibre’s increased pulp production and delivery
volumes had a clearly positive effect on result
• The operating result also improved due to mills’ im-
proved cost-efficiencies and better sales mix
• Planned maintenance shutdowns took place at the
Kemi and Husum mills during the third quarter
• The result was burdened by exceptional weather
conditions, higher road transport costs in the United
States and cost inflation
• Exchange rate fluctuations including hedges had a
negative effect of EUR 47 million on the operating
result compared to1–9/2017
EUR million
Metsä Board – Paperboard Industry
436 423 440
422
445
474 479
451
492
519
475
35 36 34 33
45 44
50
54
69
59
64
0
20
40
60
80
100
120
0
100
200
300
400
500
600

600
700
800
900
1000
1100
1200
2011 2012 2013 2014 2015 2016 2017 2018
Folding boxboard White-top kraftliner Sources: RISI, Inc. & FOEX Indexes Ltd
Prices of folding boxboard and white-top kraftliner in
Europe 2011–Q3/2018
EUR/tonne
Metsä Board – Paperboard Industry

Tissue and Cooking Papers’ production is being
developed
• Metsä Tissue’s sales growth was primarily due to
increased sales volumes
• The operating result was weakened by the higher
pulp price and weakening of the Norwegian krone,
Swedish krona and UK pound
• A new consumer products converting line is being
built at the Žilina mill in Slovakia
• A new away-from-home converting line is under
construction at the Raubach mill in Germany
• The modernisation of the baking paper machine in
Düren, Germany, continues
• Esa Kaikkonen was appointed CEO of Metsä
Tissue in September
EUR million
Metsä Tissue – Tissue and Cooking Papers
246 249 247 249 252 251 250
261 259 256 254
13.5 31.2
15.8
20.6
17.6
16.3 16.8
23.3
12.3
11.5
6.4
0
5
10
15
20
25
30
0
50
100
150
200
250
300

• Demand for wood focuses on regeneration and thinning felling that
can be harvested in the summer and for energy wood primarily on
crown wood
• Demand for wood products is expected to remain good, which
improves order book levels, particularly for plywood products. The
construction market is supporting demand for Kerto LVL. In the UK,
the uncertainty caused by the Brexit negotiations will be reflected in
the demand outlook, particularly in the distributor segment
• Pulp and sawn timber markets are expected to remain stable in the
last quarter of the year
• Growth in demand for paperboard is expected to continue and the
market prices in local currencies are expected to remain mainly
stable or to rise slightly. Delivery volumes in the fourth quarter are
expected to remain stable or decline slightly seasonally
• The demand in the tissue and cooking paper markets is expected
to continue stable in all market areas
Summary
Outlook

• Metsä Group’s comparable operating
result is in the last quarter of 2018
expected to be roughly at the same
level as in the third quarter of 2018.
Near-term outlook
Summary

Metsä Group Q3 2018 results presentation

Metsä Group Q3 2018 results presentation

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