Metsa Board Oyj Class A · OMXHEX:METSA
Metsa Board Oyj Class A — Q1 2022 Earnings Presentation
74 slides from Metsa Board Oyj Class A's earnings presentation, Apr 28, 2022
Slide 1: Metsä Board Investor presentation January–March 2022
Metsä Board Investor presentation January–March 2022 28 April 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-look
Slide 3: Contents
Contents This is Metsä Board 4 Investments in sustainable growth 15 January–March 2022 results 20 Profit drivers and cost structure 35 Operating environment 43 Sustainability 50 Innovation and R&D 63 Owners, management and contacts 70
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 in figures
Metsä Board in figures Comparable operating result in 2021 Sales in 2021 totalled 2,084 million EUR 387 million or 18.6% of sales Split by product Split by region EURm % 420 20 Other operations Market 5% APAC 360 9% 16 pulp 300 13% 12 240 180 8 EMEA 120 Americas 68% 4 60 White 23% kraftliners 0 0 25
Slide 6: 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 7: Investing in sustainable growth
Investing in sustainable growth • Husum pulp mill renewal, first phase • Increased bioenergy production, higher electricity self-sufficiency • Value EUR 360 million, expected start-up September 2022 • Second phase will follow during 2020s • Folding boxboard capacity expansion in Husum • +200,000 t/a
Slide 8: Operating environment supports the demand for fresh fibre paperboards
Operating environment supports the demand for fresh fibre paperboards 1 2 3 4 5 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
Slide 9: Our regional focus areas and demand drivers for fresh fibre paperboards
Our regional focus areas and demand drivers for fresh fibre paperboards Maintaining strong market position in EUROPE Metsä Board’s paperboard deliveries in 2021 % of total deliveries and actual tonnes (year 2020) • Environmental awareness and regulatory requirements support demand for recyclable pac
Slide 10: 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 21.1 59 18.7 Target 12.2 Target < 2.5x 54 10.4 > 12% 51 50 1.1 0.7 -0.2 -0.2 2019 2020 2021 Q1 22 2019 2020 2021 3/2022 2018 2019
Slide 11: Metsä Board is part of profitable Metsä Group
Metsä Board is part of profitable Metsä Group • High availability of Northern wood – nearly 100,000 Finnish forest owners as our owner base • Good control of wood raw materials from forests to pulp and board production • Consistent quality of fibres that are tailor-made for the end products FY2021:
Slide 12: Metsä Board's self-sufficiency in pulp is secured through its ownership of Metsä Fibre
Metsä Board’s self-sufficiency Metsä Fibre’s pulp deliveries in 2021 in pulp is secured through its Metsä ownership of Metsä Fibre Market 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 13: Metsä Board's strategy
Metsä Board’s strategy PURPOSE: Advancing bioeconomy and circular economy by VALUES efficiently and sustainably Reliability Cooperation Renewal Responsible profitability processing northern wood into first-class products. STRATEGY OUR STRATEGIC PROGRAMMES We grow in fibre-based Premium supplier pack
Slide 14: Aiming for 100% fossil free future and continuous improvements in resource efficiency
Aiming for 100% fossil free future and continuous improvements in resource efficiency 85 % of total energy used is fossil 83 % of the wood used for Metsä +4.3 energy efficiency % -12.6 % Reduced water use* Board’s paperboards were improvement* free certified in 2021 TARGET 100% TARGET -30% TARGET >9
Slide 15: Investing in sustainable growth
Investing in sustainable growth
Slide 16: 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 • Estimated start-up in September 2022 • Investment value EUR 360 milion • Increased bioenergy production, self-sufficiency in electricity will increase from
Slide 17: 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 18: 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 19: Metsä Fibre's bioproduct mill in Kemi, Finland
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 electricity 250% – Side-stream utilisation
Slide 20: January–March 2022 Results
January—March 2022 >», Results af FA OF f\ a “Mets
Slide 21: Key financials
Key financials Change Q1/22 Q1/21 Q1/22 Q4/21 FY/21 vs Q1/21 Sales EUR, m 582 494 18% 518 2,084 EBITDA* EUR, m 143 112 27% 109 472 Operating result* EUR, m 121 89 37% 91 387 % of sales* % 20.9 18.0 17.6 18.6 Metsä Fibre’s share of operating EUR, m 31 13 35 123 result* Earnings per share EUR 0.31 0.1
Slide 22: Q1 2022 in brief
Comparable Sales operating result Q1 2022 in brief • 2,084 Strong demand for paperboards continued; 580 121 Metsä Board’s paperboard deliveries were at 473,000 tonnes EUR million EUR million • Average sales prices of paperboards improved by 20% year-on-year • No major maintenance shutdowns; a new pr
Slide 23: Russia's attack on Ukraine
Russia’s attack on Ukraine Metsä Board’s measures to replace operations related to Russia FIGURES ARE FROM FY2021 • Paperboard sales to Russia have been discontinued Reallocation to other markets enables Metsä Board to support its customers’ growth Reallocation not limited by demand, but rather
Slide 24: Low stock levels affected paperboard deliveries in Q1 2022
Low stock levels affected paperboard deliveries in Q1 2022 Q1 2022 vs Q1 2021: -4% Q1 2021: Q1 2022: White kraftliners Folding boxboard 491,000 473,000 tonnes tonnes 500 162 166 400 156 161 148 143 166 1,000 tonnes 138 146 140 152 144 143 1,000 tonnes 300 200 329 348 302 299 305 300 298 310 318 297
Slide 25: Paperboard sales by market area
Paperboard sales by market area FBB deliveries in Q1/2022 (Q1/2021) WKL deliveries in Q1/2022 (Q1/2021) total 307,000 tonnes (329,000) total 166,000 tonnes23% (162,000) 22% APAC 68% 19,000 APAC (28,000) 1,000 (1,000) Americas 6% 1% EMEA 66,000 EMEA Americas 100,000 (78,000) 221,000 (102,000) 22% 65,
Slide 26: Improved sales prices boosted both sales and profitability, operating margin over 20%
Improved sales prices boosted both sales and profitability, operating margin over 20% Sales, quarterly Comparable operating result, quarterly EUR million EUR million and % of sales FY 2021 FY 2020: FY 2021: EUR 387 million EUR 1,890 2,084 million margin 18.6% 400 million 2000 518 91 FY 2020: 473 300
Slide 27: Main items affecting comparable operating result
Main items affecting comparable operating result Q1 2022 vs Q1 2021: +37% EUR 121 million vs EUR 89 million Positives: Negatives: • Increased average sales prices • Rapid cost inflation in chemicals, energy in paperboards and logistics, higher fixed costs • Increased market pulp prices • Lower deliv
Slide 28: Market pulp
Market pulp Pulp price (PIX) development in Europe and China • Market pulp deliveries in Q1 2022 vs Q1 2021 USD/tonne – Metsä Board +5% (122,000 vs 116,000 tonnes) 1,600 – Metsä Fibre*) -5% (749,000 vs 787,000 tonnes) 1,400 1,200 • Good demand in long-fibre market pulp in Europe and China 1,000 800
Slide 29: Q1 2022 comparable ROCE at 21.1%
Q1 2022 comparable ROCE at 21.1% Comparable return on capital employed, % Quarterly and rolling 12 months 22% 22% 20% 20% 18% 18% 16% 16% 14% 14% 12% Target > 12% 12% 10% 10% 8% 8% 6% 6% Q1/17 Q2/17 Q3/17 Q4/17 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
Slide 30: Strong profitability reflected in operating cash flow
Strong profitability reflected in operating cash flow Q1 cash flow includes the dividend from Metsä Fibre, EUR 59 million 450 450 400 400 350 350 300 300 EUR million EUR million 250 250 200 200 150 134 150 120 90 81 93 100 80 72 74 72 100 49 59 36 44 37 38 37 50 29 31 27 33 30 24 50 14 17 23 0 0 -17
Slide 31: Net debt and leverage remained negative
Net debt and leverage remained negative 31 March 2022: Net debt EUR -100 million, comparable EBITDA R12: EUR 502 million Net debt, EUR million Net debt to comparable EBITDA (last 12 months) 600 1.5 500 1.3 1.2 1.2 Financial target: 400 1.1 1.1 Net debt to 1.0 1.0 1.0 0.9 comparable 300 0.8 EBITDA <
Slide 32: Debt structure and liquidity
Debt structure and liquidity Interest-bearing debt Liquidity EUR 468 million EUR 957 million Financial leases and Other other loans committed credit facilities 28 192 191 Loans from 249 financial Bonds 565 institutions Syndicated 200 Liquid assets and credit facility investments (RCF) Liquidity is c
Slide 33: Debt maturity and credit ratings
Debt maturity and credit ratings Maturity of interest-bearing debt Total EUR 468 million EUR million 31 March 2022 300 250 • Total interest-bearing debt was EUR 468 200 million and net debt was EUR -100 million 150 100 • The average interest rate on loans at the end 50 of the review period was 2.3%,
Slide 34: Near-term outlook
Near-term outlook April–June 2022 • Strong demand for paperboards continues • Metsä Board’s paperboard delivery volumes expected to remain stable, average sales prices expected to increase compared to Q1 2022 • Demand for market pulp is expected to remain good. Several factors limit supply • Increas
Slide 35: Profit drivers and cost structure
Profit drivers and cost structure
Slide 36: 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 1.5 billion White kraftliners Price / tonne +/- 10% >EUR 50 million Other currencies GBP 2% 7% FX USD/EUR +/- 10%
Slide 37: Cost inflation has been rapid
Cost inflation has been rapid Metsä Board’s cost structure in 2021 Total costs EUR 1,747 million (1,532) Other fixed Wood 9% (13) 15% (17) • Cost inflation continued in Q1 2022 especially in Personnel logistics, energy and chemicals. Logistics costs 12% (13) increased due to the reduced availability
Slide 38: Wood is Metsä Board's main raw material
Wood is Metsä Board’s main raw material • Wood represents over 25% out of Metsä Board’s total costs. In 2021, Metsä Board used 8.3 million m3 wood1) • Sourcing function is centralised in Metsä Group’s Wood supply and Forest Services • In 2021, 83% of sourced wood was certified • Majority of wood sou
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 1,300 1,400 Folding boxboard 1,200 1,300 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 Sources
Slide 40: 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 41: 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 2010 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 Pine Spruce Bir
Slide 42: FX rates development: EUR/USD and EUR/SEK
FX rates development: EUR/USD and EUR/SEK EUR/USD EUR/SEK 1.25 11.2 1.23 11 1.21 1.19 10.8 1.17 10.6 1.15 10.4 1.13 1.11 10.2 1.09 10 1.07 1.05 9.8 42
Slide 43: Operating environment
a — sey: a? i rer (et ey ) 2 ; y AY : 2 y Maw " Operating envitoment
Slide 44: Paperboard is the packaging material of the future
Paperboard is the packaging material of the future The global packaging market totals USD 1015 billion Paperboard packaging grows faster than the total and forecast to grow by 3.9% p.a. 2021–2026 packaging market Calculated as the value of finished products USD billion +2,1%/a 450 2021–2026 +5% p.a.
Slide 45: Metsä Board operates in a growing market
Metsä Board operates in a growing market Cartonboard growth forecast Containerboard growth forecast CAGR 2020–2025 CAGR 2020–2025 70,000 200,000 60,000 175,000 150,000 50,000 1000 metric tonnes 1000 metric tonnes 125,000 40,000 100,000 30,000 75,000 20,000 50,000 Asia ~4%/a 10,000 25,000 0 0 2018 20
Slide 46: Metsä Board produces light weight fresh fibre cartonboards
Metsä Board produces light weight fresh fibre cartonboards: folding boxboard and food service board Global annual demand for cartonboard SBB = solid bleached board WLC FBB SBB CUK CUK = coated unbleached white-lined chipboard kraftboard folding boxboard 20 Mt 3 Mt 3 Mt FSB = foodservice board 12 Mt
Slide 47: We have good growth opportunities in premium paperboards
We have good growth opportunities in premium paperboards 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 grades 33% WKL Recycled WKL Recycled CWKL White grades White grades WKL testliner 85% testliner Whi
Slide 48: Metsä Board's 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 49: Folding boxboard and white kraftliner producers in Europe
Folding boxboard and white kraftliner producers in Europe – Metsä Board has a leading position Folding boxboard White kraftliner in Europe Total capacity 4.5m tonnes in Europe Total capacity 2.6m tonnes Others Metsä Others Metsä #5 Board Board #4 #1 #5 #1 30% #4 26% #3 #2 #3 #2 49
Slide 50: 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 51: Indirect emissions from value chain are included in our science-based targets
Indirect emissions from value chain are included in our science-based targets to reduce CO2 emissions Breakdown of fossil CO2 Breakdown of Scope 3 emissions emissions total 1,854,840 tonnes in 2021 total 2,283,678 tonnes in 2021 End of life Investments treatment of sold 2% Scope 1 products 11% 17% S
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 53
Slide 54: 85% of our total energy used is fossil free
85%1) of our total energy used is fossil free Total energy consumed in 2021 Energy consumption (total 11.9 TWh as primary energy) • 85% of total energy Metsä Board uses is fossil free Fossil- based • Target of 100% fossil free mills by 2030 (scope 1 and 2) fuels 15% Renewable energy, • Company has a
Slide 55: 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 56: Fresh fibre paperboards offer solutions to global challenges
Fresh fibre paperboards offer solutions to global challenges Increased waste Replacing fossil- Ensuring food Reducing carbon generation due to based materials, safety footprint urbanisation i. e. plastics The solution: The solution: The solution: The solution: pure and safe fresh renewable energy, P
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: Safety – consumers and legislators react to health risks
Safety – consumers and Legislation and various legislators react to health risks country-specific recommendations increasingly limit the use of recycled fibres in food packaging Consumers today are more aware of chemicals contained in recycled fibres Recycling is of utmost importance and their healt
Slide 59: 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 60: 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 61: 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 62: Strong evidence of sustainability leadership
Strong evidence of sustainability leadership Metsä Board is among the top Metsä Board again scored ‘Platinum’ in Metsä Board’s GHG emission As part of Metsä Group, Metsä Board is committed companies to have received a triple ‘A’ EcoVadis’s sustainability rating in 2021 reduction targets are approved
Slide 63: Innovation and R&D
Innovation and R&D
Slide 64: 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 65: Innovations through collaboration
Innovations through collaboration Joint ventures 3D fibre ExpandFibre and collaboration with packaging with Fortum and start-up companies solution Metsä Group Recent example: A joint project with Metsä Spring A joint R&D programme to develop Metsä Board and Esbottle are developing and Valmet for dev
Slide 66: Metsä Board's main focus areas in R&D
Metsä Board’s main focus areas in R&D Sustainability guides our R&D work 1. Lightweight 2. Barrier paperboards as alternatives to plastics paperboards 66
Slide 67: High-yield pulp makes the difference between folding boxboard and other grades
High-yield pulp makes the difference between folding boxboard and other grades … Three-layer structure of folding boxboard Light weight → better yield and sustainability High strength and bending stiffness → secure protection High brightness and smoothness → excellent printability Consistent quality
Slide 68: … and leave more trees standing
… and leave more trees standing SBS = (100% chemical pulp) 5 m3 of wood per tonne of pulp Metsä Board FBB (up to 70% BCTMP, = 30% chemical pulp ) 3.4 m3 of wood per tonne of pulp 68
Slide 69: 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 70: Owners, management and contact information
Owners, management and contact information
Slide 71: 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 31 March 2022 EUR million % 3,500 25 Foreign owners 13% 3,000 20 2,500 15 2,000 Domestic Metsäliitto private owners Cooperative 1,500 19% 48% 10 1,000 5 500 Dom
Slide 72: 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 73: Metsä Board's production
Metsä Board’s production Total paperboard capacity: Our net balance in pulp in 2021, Folding boxboard (FBB): 1,360,000 t/a including the 24.9% ownership in Metsä White kraftliner (WKL): 675,000 t/a Fibre**, is approximately 400,000 t/a Wood sourced from Finland, Sweden, Kemi Baltics and Russia. Ääne
Slide 74: Together we make the perfect package
74 Together we make the perfect package Katri Sundström Vice President, Investor relations +358 10 462 0101 [email protected]