Metsa Board Oyj Class A · OMXHEX:METSA
Metsa Board Oyj Class A — H1 2022 Earnings Presentation
72 slides from Metsa Board Oyj Class A's earnings presentation, Jul 28, 2022
Slide 1: Metsä Board Investor presentation January–June 2022
Metsä Board Investor presentation January–June 2022 28 July 2022
Slide 2: Disclaimer
Disclaimer This presentation includes forward-looking statements. The words “believe”, “expect”, “anticipate”, “intend”, “may”, “plan”, “estimate”, “will”, “should”, “could”, “aim”, “target”, “might” or in each case, their negative, or any similar expressions identify certain of these forward-lookin
Slide 3: Contents
Contents This is Metsä Board 4 Investments in sustainable growth 14 H1 2022 results 19 Profit drivers and cost structure 34 Operating environment 43 Sustainability 49 Innovation and R&D 62 Owners, management and contacts 68
Slide 4: Metsä Board – Investment highlights
Metsä Board – Investment highlights Focus on Strong position Aiming for a Part of profitable sustainable fresh in a growing fossil free future Metsä Group fibre paperboards market • We produce premium paperboards • #1 in folding boxboard and white • Fossil free production and products • A unique gro
Slide 5: Metsä Board is part of profitable Metsä Group
Metsä Board is part of profitable Metsä Group • A unique group structure ensures an uninterrupted production chain from sustainably managed forests to high-quality end products • Consistent quality of fibres that are tailor-made for the end products FY2021: Sales EUR 6.0 billion │ROCE 16.2%│ Personn
Slide 6: Metsä Board in figures
Metsä Board in figures Comparable operating result Sales in 2021 totalled 2,084 million Last 12 months: EUR 463 million or 20.4% of sales Split by product Split by region EUR m % 500 25 Other operations Market 5% APAC 400 20 pulp 9% 13% 300 15 200 10 EMEA Americas 68% 100 5 White 23% kraftliners 0 0
Slide 7: We focus on ecological and safe fresh fibre paperboards
We focus on ecological and safe fresh fibre paperboards End uses are mainly in consumer product packaging Folding boxboards and food service boards White kraftliners, coated and uncoated End uses of folding boxboards* End uses of white kraftliners* Graphic end uses e-commerce Other consumer Various
Slide 8: Operating environment supports the demand for fresh fibre paperboards
Operating environment supports the demand for fresh fibre paperboards Population growth, Global Availability Regulation and The requirements of urbanisation and e-commerce and quality of consumer the circular economy rising living continues recycled fibre is preferences favour become more standards
Slide 9: Metsä Board’s main markets are Europe and North-America
Metsä Board’s main markets are Europe and North-America Paperboard deliveries in 2021 Maintaining strong market position in EUROPE % of total deliveries and actual tonnes (year 2020) • Environmental awareness and regulatory requirements support demand for recyclable packaging materials 8 • Food safe
Slide 10: Self-sufficiency in pulp is secured through ownership of Metsä Fibre
Metsä Board’s self-sufficiency Metsä Fibre’s pulp deliveries in 2021 in pulp is secured through its Market Metsä ownership of Metsä Fibre Group pulp, internal APAC use Market pulp, EMEA • Metsä Fibre is globally a leading producer of softwood market pulp (NBSK) and a significant sawn timber producer
Slide 11: Long-term financial targets
Long-term financial targets Comparable ROCE: Net debt/ Dividend policy: Target at least 12% comparable EBITDA: Payout ratio at least 50% Maximum level 2.5x of net result 23.0 59 18.7 Target 12.2 <2.5x 54 10.4 Target >12% 51 50 1.1 0.7 0.2 -0.2 2019 2020 2021 H1 2022 2019 2020 2021 H1 2022 2018 2019
Slide 12: Investing in sustainable growth
Investing in sustainable growth • Husum pulp mill renewal, first phase • No new pulp capacity, higher energy self-sufficiency • EUR 360 million, expected start-up November 2022 • Second phase will follow during 2020s • Folding boxboard capacity expansion in Husum • +200,000 t/a folding boxboard • EU
Slide 13: We aim for 100% fossil free future and continuous improvements in resource efficiency
We aim for 100% fossil free future and continuous improvements in resource efficiency 85 % 83 % of the wood used for Metsä +4.3 % energy efficiency -12.6 % Reduced water use* of total energy used is fossil improvement* Board’s paperboards were free certified in 2021 TARGET 100% TARGET -30% TARGET >9
Slide 14: Investing in sustainable growth
Investing in sustainable growth
Slide 15: Husum pulp mill renewal
Husum pulp mill renewal A significant step towards company’s target of 100% fossil free mills by 2030 PHASE 1: New recovery boiler and turbine • Expected start-up November 2022 • Investment value EUR 360 milion • Increased bioenergy production, self-sufficiency in electricity will increase from 40%
Slide 16: Folding boxboard capacity expansion in Husum BM1
Folding boxboard capacity expansion in Husum BM1 Further strengthens Metsä Board’s leading market position in Europe • Investment increases the annual capacity of BM1 by +200,000 tonnes to 600,000 tonnes • Investment value EUR 210 million • Expected start-up in Autumn 2023 and full production capaci
Slide 17: Development programme of Kemi paperboard mill
Development programme of Kemi paperboard mill Enhanced efficiency in water and energy use • The annual capacity of white kraftliner machine will increase by +40,000 tonnes (to 465,000 t/a) • Expected start up in H2 2023, full production capacity to be reached in 2025 • Investment value EUR 67 millio
Slide 18: Metsä Fibre’s bioproduct mill in Kemi, Finland
*) Metsä Board owns 24.9% of Metsä Fibre Metsä Fibre’s* bioproduct mill in Kemi, Finland • The new mill replaces current Kemi pulp mill with annual capacity of 610,000 tonnes • New bioproduct mill – Annual pulp capacity 1.5 million tonnes* – Annual pulpwood consumption 7.6 m3 – Self-sufficiency in e
Slide 19: January–June 2022 Results
January—June 2022 Results we - Ea I S | Y } RY
Slide 20: Key financials
Key financials Change Change FY 2021 Q2/22 Q2/21 Q2/22 H1/22 H1/21 H1/22 vs Q2/21 vs H1/21 Sales EUR, m 651 556 +17% 1,232 1,050 +17% 2,084 EBITDA* EUR, m 167 125 +34% 310 238 +30% 472 Operating result* EUR, m 146 102 +42% 267 191 +40% 387 % of sales* % 22.4 18.4 21.7 18.2 18.6 Metsä Fibre’s share o
Slide 21: Q2 2022 in brief
Comparable Q2 2022 in brief Sales operating result • 2,084 Strong demand for paperboards continued 651 146 • Delivery volumes were affected by planned increase in stock levels EUR million EUR million (Q2 2021: EUR 556m) (Q2 2021: EUR 102m) • High production volumes despite several maintenance shutdo
Slide 22: Update on Russia’s attack on Ukraine
Update on Russia’s attack on Ukraine Impacts and measures taken • Metsä Board’s paperboard sales to Russia have been discontinued Volumes released from Russia have been sold to other markets In 2021, Russia’s share of sales was 5.6% (130,000 tonnes of folding boxboard) • Metsä Group has discontinu
Slide 23: Increase in stock levels reflected in delivery volumes
Increase in stock levels reflected in delivery volumes Metsä Board’s paperboard delivery volumes H1 2021: H1 2022: 1,005,000 tonnes -6% 944,000 tonnes White kraftliners Folding boxboard Q2 2021: Q2 2022: 514,000 tonnes -8% 472,000 tonnes 500 166 400 162 156 148 143 165 164 1,000 tonnes 152 144 143 1
Slide 24: Paperboard sales by market area
Paperboard sales by market area Total deliveries in H1 2022 were 944,000 (H1 2021: 1,005,000) FBB deliveries in H1 2022 (H1 2021) WKL deliveries in H1 2022 (H1 2021) total 615,000 tonnes (677,000) total 329,000 tonnes 23% (328,000) 22% APAC 68% 41,000 (58,000) APAC 1,000 (4,000) Americas 141,000 7%
Slide 25: Record high sales and profitability
Record high sales and profitability H1 2022 vs. H1 2021: Sales +EUR 183 million, comparable operating result +EUR 76 million Sales, quarterly Comparable operating result, quarterly EUR million EUR million and % of sales FY 2021: FY 2021: EUR 387 million FY 2020: H1 2022: 2,084 million margin 18.6% E
Slide 26: Main items affecting comparable operating result
Main items affecting comparable operating result Q2 2022 vs Q2 2021: +42% H1 2022 vs H1 2021: +40% EUR 146 million vs 102 EUR million EUR 267 million vs EUR 191 million Positives: Positives: • Increased sales prices in paperboards and market pulp • Increased sales prices in paperboards (+25%) and ma
Slide 27: Market pulp
Market pulp Pulp price (PIX) development in Europe and China USD/tonne • Good demand in long-fibre market pulp 1600 in Europe and China 1400 1200 • Market pulp deliveries in H1 2022 vs H1 2021 • Metsä Board +1% (274,000 vs 272,000 tonnes) 1000 • Metsä Fibre*) -1% (1,521,000 vs 1,530,000 tonnes) 800
Slide 28: Q2 2022 comparable ROCE at 25.0%
Q2 2022 comparable ROCE at 25.0% Comparable return on capital employed, % Quarterly and rolling 12 months 26% 26% 24% 24% 22% 22% 20% 20% 18% 18% 16% 16% 14% Target > 12% 14% 12% 12% 10% 10% 8% 8% 6% 6% Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q4/21 Q
Slide 29: Increase in working capital impacted cash flow
Increase in working capital impacted cash flow 400 400 300 300 EUR million EUR million 200 200 134 120 90 81 93 100 80 72 74 72 100 49 59 36 44 37 38 37 29 31 27 33 30 24 23 14 17 3 0 0 -17 -100 -73 -100 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Free cash fl
Slide 30: Dividend payments and increase in working capital impacted net debt and leverage ratio
Dividend payments and increase in working capital impacted net debt and leverage ratio Net debt, EUR million Net debt to comparable EBITDA (last 12 months) 600 1.5 500 1.3 Financial target: 1.2 1.2 400 1.1 1.1 Net debt to 1.0 1.0 1.0 comparable EBITDA 300 <2.5 0.8 0.7 200 0.5 0.2 100 0.3 380 352 308
Slide 31: Debt structure and liquidity on 30 June 2022
Debt structure and liquidity on 30 June 2022 Interest-bearing debt Liquidity EUR 461 million EUR 675 million Financial leases and Other other loans committed credit facilities 19 125 Loans from 193 financial 249 Liquid assets institutions Bonds 350 and 200 investments Syndicated credit facility (RCF
Slide 32: Debt maturity and credit ratings
Debt maturity and credit ratings Maturity of interest-bearing debt Total EUR 461 million EUR million 30 June 2022 300 250 • Total interest-bearing debt was EUR 461 200 million, and net debt was EUR 109 million 150 100 • The average interest rate on loans at the end 50 of the review period was 2.3%,
Slide 33: Near-term outlook
Near-term outlook July–September 2022 • Solid demand for paperboards is expected to continue with stable paperboard delivery volumes • Sales prices expected to increase compared to Q2 2022 • Strengthening US dollar improves profitability • Demand for market pulp is expected to remain good. Several f
Slide 34: Cost structure and profit drivers
Cost structure and profit drivers
Slide 35: Cost inflation continued in H1 2022
Cost inflation continued Metsä Board’s cost structure in 2021 in H1 2022 Total costs EUR 1,747 million (1,532) Other fixed Wood 9% (13) • Rapid cost inflation in chemicals and energy 15% (17) Personnel • Logistics costs increased due to the limited 12% (13) availability of transport equipment, highe
Slide 36: Wood is Metsä Board’s main raw material
Wood is Metsä Board’s main raw material • Wood represents over 25% of Metsä Board’s total costs • In 2021, Metsä Board used 8.3 million m3 wood1) of which 83% of was certified • Majority of wood sourced in Finland comes from the members of Metsäliitto Cooperative. In Sweden Metsä Board has a long-te
Slide 37: Metsä Board’s self-sufficiency in electricity is increasing
Metsä Board’s self-sufficiency in electricity is increasing Total energy consumed in 2021 (total 11.9 TWh as primary energy) Total energy consumption Fossil- based • Energy represents 13% of total costs (in 2021 ~EUR 200 million), of which fuels 15% Renewable roughly on third is exposed to market pr
Slide 38: Main profit drivers and sensitivities
Main profit drivers and sensitivities Component Unit Change Impact on EBIT, approximately Folding boxboard Price / tonne +/- 10% >EUR 100 million Annual FX transaction exposure total EUR 1.8 billion White kraftliners Price / tonne +/- 10% >EUR 50 million Other currencies GBP 2% 6% FX USD/EUR +/- 10%
Slide 39: Price development of folding boxboard and white kraftliners in Europe
Price development of folding boxboard and white kraftliners in Europe EUR/tonne EUR/tonne 1,400 1,400 Folding boxboard 1,300 1,300 1,200 1,200 1,100 1,100 1,000 1,000 900 White top kraftliners 900 800 800 700 700 600 600 500 500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 S
Slide 40: FX rates development: EUR/USD and EUR/SEK
FX rates development: EUR/USD and EUR/SEK EUR/USD EUR/SEK 1.25 11.2 11 1.2 10.8 1.15 10.6 1.1 10.4 10.2 1.05 10 1 9.8 40
Slide 41: Price development of pulp (PIX)
Price development of pulp (PIX) Long-fibre (SW) and short-fibre (HW) pulp USD or EUR USD or EUR 1,400 1,400 1,350 1,350 1,300 Long-fibre Europe, USD 1,300 1,250 1,250 1,200 1,200 1,150 Short-fibre Europe, USD 1,150 1,100 1,100 1,050 1,050 1,000 1,000 950 950 900 900 850 850 800 800 750 750 700 700 6
Slide 42: Price development of pulpwood in Finland and Sweden
Price development of pulpwood in Finland and Sweden Delivery at roadside Finland Sweden EUR/m3 SEK/m3 40 400 35 350 30 300 25 250 20 200 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Pine Spruce Birch Conifers Spruce Birc
Slide 43: Operating environment
Operating environment
Slide 44: Paperboard is the packaging material of the future
Paperboard is the packaging material of the future The global packaging market was USD 1,015 billion in 2021 Paperboard packaging grows faster than the total and is forecast to grow by 3.9%/a on average to 2026 packaging market +2.1%/a 2021–2026 450 +2.8%/a +5% per annum 2021–2026 2021–2026 400 Glas
Slide 45: Global annual demand in cartonboard and white linerboard
Global annual demand in cartonboard (folding and graphics) and white linerboard FSB 43% Americas EMEA FBB APAC Other fresh fibre grades FSB FSB FBB 27% FBB 40% Other Other Recycled fresh fibre fresh fibre CWKL grades grades 33% grades WKL Recycled WKL Recycled CWKL White grades White grades WKL test
Slide 46: Global annual demand for total cartonboard
Global annual demand for total cartonboard SBB = solid bleached board WLC FBB CUK = coated unbleached SBB CUK kraftboard white-lined chipboard folding boxboard 20 Mt 3 Mt 3 Mt FSB = foodservice board 12 Mt LPB = liquid packaging board Grey board Folding & graphic boards FSB LPB 10 Mt 38 Mt 4 Mt 4 Mt
Slide 47: Linerboards are at the top of the quality pyramid
Metsä Board’s linerboards are at the top of the quality pyramid – in a very niche market Global annual demand in containerboards Coated white Uncoated white fresh fibre fresh fibre 1Mt 3.5 Mt White fresh fibre White recycled Brown kraftliner Brown testliner 4.5 Mt 7Mt 28Mt 61.5Mt Fresh fibre Recycle
Slide 48: Folding boxboard and white kraftliner producers in Europe
Folding boxboard and white kraftliner producers in Europe – Metsä Board has a leading position* *) measured by production capacities Folding boxboard White kraftliner in Europe in Europe Total capacity 4.2m tonnes Total capacity 2.5m tonnes Others Metsä #5 Metsä Others Board Board #1 #1 #5 #4 32% #4
Slide 49: Our sustainability objectives
Our sustainability objectives Climate and environment Forests and wood Sustainable products Well-being Climate change mitigation Sustainable use of Safe products with low Responsible and safe and resource-efficient renewable wood fibre environmental impact corporate culture production
Slide 50: Material topics are reported in line with common frameworks
Material topics are reported in line with common frameworks SASB TCFD • Metsä Board reports in accordance with the SASB • Metsä Board’s reporting on climate-related risks and Standard for Pulp and Paper Products within SASB’s opportunities complies with the TCFD’s Renewable Resources and Alternative
Slide 51: Strong evidence of sustainability leadership
Strong evidence of sustainability leadership As part of Metsä Group, Metsä Board is committed Metsä Board is among the top Metsä Board again scored ‘Platinum’ in Metsä Board’s GHG emission to the UN Global Compact corporate responsibility companies to have received a triple ‘A’ EcoVadis’s sustainabi
Slide 52: Zero fossil CO2 emissions
Metsä Board’s industry-leading target ZERO FOSSIL CO2 EMISSIONS Fossil free production and products by the end of 2030
Slide 53: Roadmap to fossil free mills by the end of 2030
Roadmap to fossil free mills by the end of 2030 100% TAKO In steam production, Target: natural gas is JOUTSENO replaced by e.g. 100% electricity Natural gas is replaced by biogas or electricity SIMPELE Share of fossil free energy (of total energy) HUSUM, KASKINEN, KYRO and SIMPELE Peat is replaced b
Slide 54: Metsä Board has reduced its fossil CO2 emissions by 23% since 2018
Metsä Board has reduced its fossil CO2 emissions by 23% since 2018 CO2 emissions per product tonne, Scope 1&2 Emission allowances • Metsä Board has received emission allowances in 600,000 200 accordance with the European Union Emissions Trading System 500,000 150 • During the past years, the number
Slide 55: Fossil free energy is mainly based on renewable fuels and nuclear power
Fossil free energy is mainly based on renewable fuels and nuclear power Energy consumption by sourcing method, Fuel consumption in own energy generation calculated as primary energy and process fuels Total 11.9 TWh Total 5.4 TWh Purchased energy, fossil-based Oil Peat 6% 6% 2% Own energy Gas Purchas
Slide 56: All wood we use comes from sustainably managed forests
All wood we use comes from sustainably managed forests – our paperboards are available with PEFC or FSC® certification 10 % of all the forests 83 % of the wood used for > 90 % Metsä Board’s target of in the world Metsä Board’s the share of certified are certified paperboards were wood by 2030 certif
Slide 57: Two major factors influencing CO2 of packaging
Two major factors influencing CO2 of packaging 1 2 Fossil or non-fossil-based Efficient material use, energy light-weighting Nordic fresh fibre paperboard Using less material to produce a production uses mainly renewable required type of packaging energy Less weight to be transported In Central and
Slide 58: Fresh fibre keeps the recycling loop going
Fresh fibre keeps the recycling loop going Fresh fibres are needed to ensure strength and purity, and PAPERBOARD IS HIGHLY to keep the RECYCLED BUT 100% recycling loop RECOVERY IS NOT ongoing RENEWABLE POSSIBLE FRESH FIBRE from sustainably managed forests Not all paper and board are recyclable e.g.
Slide 59: Fresh fibre paperboard is an alternative to plastics
Sustainable packaging solutions Fresh fibre paperboard is an alternative to plastics • Paper/cardboard is the preferred packaging material by consumers • Several brand owners have committed to get rid of unnecessary plastic and to have 100% reusable, recyclable and compostable (plastic) packaging by
Slide 60: Plastic replacement potential
Plastic replacement potential roughly 2 million tonnes Cartonboard and rigid plastic packaging market size in selected food categories 5 Mt 1 Mt Plastic ~6M Technical complexity Board 2 Mt Board tonnes Potential plastic Plastic ~2M replacement ~2M tonnes Plastic tonnes Board Potential plastic replac
Slide 61: The circular economy at Metsä Board
The circular economy at Metsä Board Recyclable and compostable Ensuring that more wood grows than is paperboard that can be processed using harvested existing collection and recycling infrastructure Enhancing biodiversity Keep Renewable Fresh fibres are strong and recycling wood-based Using every si
Slide 62: Innovation and R&D
Innovation and R&D
Slide 63: Metsä Board’s main focus areas in R&D
Metsä Board’s main focus areas in R&D 1. Continuing development 2. Creating of lightweight new barrier solutions to reduce plastic paperboards 63
Slide 64: High-yield pulp makes the difference between folding boxboard and other grades
High-yield pulp makes the difference between folding boxboard and other grades Lightweight yet strong and stiff Improved yield Improved sustainability = = = paperboard for cost-efficient, more cartons per tonne less natural resources used, sustainable and sturdy packaging lower carbon footprint
Slide 65: Metsä Board offer solutions to replace plastics
Metsä Board offer solutions to replace plastics • Strong interest in Metsä Board’s dispersion coated barrier paperboard – main use in food service packaging – Sales is expected to accelerate in 2022 • Company has launched a biobarrier programme – Developed solutions and polymers to be based on fossi
Slide 66: Metsä Board’s new Excellence Centre
Metsä Board’s new Excellence Centre – finding the solutions together • Accelerating material and packaging innovation • Providing a global collaboration platform for customers and technology partners
Slide 67: Innovations through collaboration
Innovations through collaboration Joint ventures 3D fibre ExpandFibre and collaboration with packaging with Fortum and start-up companies solution Metsä Group Metsä Board and Esbottle developed A joint project with Metsä Spring A joint R&D programme to develop a new concept for an ecological and Val
Slide 68: Owners, management and contact information
Owners, management and contact information
Slide 69: Market cap and ownership distribution
Market cap and ownership distribution Metsä Board has two share series, A and B shares Market cap and foreign owners Ownership distribution 30 June 2022 EUR million % 3,500 25 Foreign owners 15% 3,000 20 2,500 15 2,000 Metsäliitto Domestic private owners Cooperative 1,500 18% 48% 10 1,000 5 500 Dome
Slide 70: Metsä Board Corporate Management Team
Metsä Board Corporate Management Team Henri Sederholm, CFO Ari Kiviranta, SVP, Technology Markku Leskelä, SVP, Development Member of CMT since 5/2021 Member of CMT since October 2021 Member of CMT since 2014 At Metsä Group since 2003 At Metsä Group since 1993 At Metsä Group since 1993 Shares 42,466
Slide 71: Metsä Board’s production
Metsä Board’s production Total paperboard capacity: Total pulp/BCTMP capacity: Folding boxboard (FBB): 1,360,000 t/a 1,470,000 t/a **)Ownership in Metsä Fibre 24.9% White kraftliner (WKL): 675,000 t/a Wood sourced from Finland, Sweden and Kemi Baltics. Äänekoski 425,000 t/a WKL 260,000 t/a FBB 610,0
Slide 72: Together we make the perfect package
72 Together we make the perfect package Katri Sundström Vice President, Investor relations +358 10 462 0101 [email protected]