january-march-2017-investor-presentation.pptx …...investor presentation q1/2017 2 contents...

Metsä BoardInvestor presentation 1–3/2017

4 May 2017

Investor presentation Q1/20172

ContentsInvestment highlights 3

Strategy and financial targets 12

Operating environment and market position 20

Growth in the paperboard business 29

Result for January–March 2017 38

Balance sheet and financing 51

Capex and Husum investment programme 59

Production, capacities and sourcing 64

Sustainability 71

Shares and owners 77

Appendix 80

Contact information 87

Investment highlights

• Market leader in folding boxboard in Europe and global market leader in coated white fresh fibrelinerboard

• Strong fibre know-how and self-sufficiency in pulp • Sales in 2016 EUR 1.7 billion and comparable

operating result EUR 137 million• Appr. 2,500 employees in 23 countries• Global sales to over 100 countries and eight

production units in Finland and Sweden


Metsä Board in brief

50%25%

15%

10%

Sales split in 2016

Folding boxboardLinerboardsMarket pulpOthers

75 %

17 %

8 %

Sales split by region in 2016

EMEA

Americas

APAC

5

Various end-uses from high-quality paperboardsFolding boxboards, white fresh fibre linerboards and fully bleached linerboards

Consumer goods Retail-readyFood service


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.

6

Metsä Board’s folding boxboard has a three-layer structure


• Lightweighting– Metsä Board’s folding boxboard can be even 30% lighter than

competing grades (eg. SBS, WLC)

• Purity and safety– Important especially in food packaging

• Sustainability– Fresh fibres are recyclable and renewable raw material. Metsä

Board’s wood raw material is 100% traceable to sustainably managed northern forests

• Quality– Metsä Board’s paperboards are premium-quality

7

Metsä Board’s paperboards havemany competitive advantages


8

Metsä Board has a wide customer base Brand owner sales represents roughly 50% in folding boxboard, corrugated box manufacturers is the biggest customer segment in white linerboards

FOLDING BOXBOARD WHITE LINERBOARDSfresh forest fibre-based

CONVERTERSCORRUGATED BOX MANUFACTURERS

MERCHANTS

BRAND OWNERS


Strong profitability development over time 2016 was negatively impacted by Husum’s new FBB machine ramp-upComparable ROCE-%


Comparable EBIT-%

4,8

6,4

9,1

11,3

8,1

0

2

4

6

8

10

12

2012 2013 2014 2015 2016

%

3,6

5,2

6,8

9,08,0

0

2

4

6

8

10

2012 2013 2014 2015 2016%

Target over 12% from 2017


Strong improvement in productivity over time

1 000

1 100

1 200

1 300

1 400

1 500

1 600

1 700

1 800

1 900

2 000

1 000

1 300

1 600

1 900

2 200

2 500

2 800

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E

Productivity (capacity) Personnel average

Production capacity (tonnes) / employee at current millsPersonnel

Capacity tn /employee

• High investment costs

• Limited availability of high yield pulp (e.g. BCTMP)

• Global brand owners and corrugated box manufacturers not willing to change paperboard suppliers easily in the high-quality segments

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

• Skilled people and organizations a crucial success factor


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 of premium paperboards creating value for customers globally

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


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, operations 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 our market position further and maintain healthy price levels


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


Growth

Financial targets

Comparable ROCE, %


Net gearing, %

4,8

6,4

9,1

11,3

8,1

2012 2013 2014 2015 2016

72 70

51

32

44

2012 2013 2014 2015 2016

• Return on capital employed (ROCE) a minimum of 12% from 2017 onwards• Net gearing a maximum of 70%

• 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


Main priorities and actions to achieve financial targets

• Metsä Board’s dividend payout target is at least 1/3 of EPS

• Dividend for 2016:– EUR 0.19 per share– Totalling EUR 68 million– Corresponds to 76 per cent of EPS

0,00

0,10

0,20

0,30

0,40

0,50

2012 2013 2014 2015 2016

EPS and DPS, EUR

Earnings per share Dividend per share


Dividend and EPS

Operating environment and market position

Demand is based on global trends

Globalisation Technology Sustainability Consumption

• Increasing role of retail and harmonisation of global brands

• Growing importance of logistics

• Consolidation of carton converters

• New innovations utilising wood fibre and other biomaterials

• Continuous development of production technologies

• Digitisation and automatisation change business dynamics

• Greater significance of resource efficiency drives circular economy and life-cycle thinking

• Increasing regulation brings additional obligations

• Social responsibility through value chain

• Growing consumption and consumers’ increasing quality needs globally

• Stronger demand for sustainable packaging

• Digital services change purchasing behavior

The global paperboard packaging market is about USD 260 billion

The total packaging market is USD 840 billion


Average annual growth rate of paperboard packaging

Paperboard packaging

Other wood fibre based packaging

Non-fibre based packaging

0

50

100

150

200

250

300

350

USD 260 bn

USD bn

Source: Smithers Pira

+ 3% p.a.

Roughly halfis made of fresh fibres

23

Global cartonboard*) market is 36 Mt/a of which folding boxboard market is about 9 Mt/a

Source: Metsä Board estimates

*) Excluding liquid packaging board, cup & plate stock, liner and uncoated recycled board.

APAC20 Mt/a

EMEA8 Mt/a

NorthAmerica

6 Mt/a

Lat.Am.2 Mt/a

Folding boxboard

Other fresh fibre grades (e.g. SBS, CUK)

Recycled grades

Avg. growth rate for folding boxboard is

3–4%/a


24

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

APAC1.0 Mt/a

EMEA0.9 Mt/a

Americas1.6 Mt/a

Avg. growth rate for food service board is

3–5%/a

Source: Metsä Board estimatesInvestor presentation Q1/2017

25Source: Metsä Board estimates


Americas3 Mt/a

EMEA4.5 Mt /a

APAC3 Mt/a

White top kraftliner

Fully bleached liner

White recycled liner

Global white linerboard market is 10.5 Mt/aGlobal coated white-top kraftliner market is 1 Mt/a, of which Metsä Board’s share is roughly 40%

Global containerboard market is 155 Mt/a, of which

• White linerboards 7%• Brown kraftliner 17%

• Brown testliner 37%

• Fluting 39%

40%

Metsä Board has a strong position in Europe

Largest Folding Boxboard Producers in EuropeTotal capacity: 3.6M tonnes

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

Sources: Company information, Pöyry Management Consulting Oy Q2/2017

15%

7%

9%

11%

21%

37%

0 300 600 900 1200 1500

Others

International Paper

Mayr-Melnhof

Kotkamills Oy

Stora Enso

Metsä Board

14%

8%

11%

13%

23%

31%

0 200 400 600 800

Others

SCA

BillerudKorsnäs

Mondi

Smurfit Kappa

Metsä Board

26 Investor presentation Q1/2017

500

600

700

800

900

1000

1100

2010 2011 2012 2013 2014 2015 2016 2017

Folding boxboard White‐top kraftliner

Market price development in folding boxboardand white-top kraftliner in Europe

Sources: Pöyry Management Consulting & FOEX Indexes Ltd

EUR/ tn


Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR

Hardwood, EUR

Hardwood, USD

USDEUR

Pulp price development (PIX)

28

350400450

500550600650

700750800850900

95010001050

'10 '11 '12 '13 '14 '15 '16 '17350400450

500550600650

700750800850900

95010001050


Growth in the paperboardbusiness

Metsä Board’s transformation work is completedFocus on premium fresh fibre paperboards for consumer and retail packaging

30

Marketgrowth

Paperboard company

ROCE %

Paper company

2006: New strategy2007–2013: Numerous divestments, closures and restructuring measures 2016: Completion of the transformation

2017: The leading fresh fibrepaperboard company in Europe


Metsä Board’s growth exceeds clearly the average market growth

31

0

250

500

750

1 000

1 250

1 500

1 750

2 000

2012 2013 2014 2015 2016 2018 target

Fresh fibre linerboard Folding boxboard

Metsä Board’s annual paperboard deliveries, 1,000 tonnes



Most important growth area is Americas

0

50

100

150

200

250

300

2011 2012 2013 2014 2015 2016 2018 target

Folding boxboard Fresh fibre linerboard

300

250

1,00

0 to

nnes

Actual and targeted deliveries to Americas


Targeted sales and sales split for new paperboard volume from Husum mill

250150

150

0

500

1 000

1 500

2 000

Deliveries in 2015 Folding boxboard toAmericas

Food service boardglobally

Linerboard toEurope andAmericas

Targeted deliveriesin 2018

A total of 400,000 tonnesof new FBB capacity

1,00

0 to

nnes

Incremental capacity in linerboard*)

*) Until July 2016 the paperboard machine (BM2) produced simultaneously fine paper reels.

GROWTH FROM THE AMERICAS IN THE COMING YEARS

AMERICASSHARE OF SALES IN 2016

17 %MAINTAINTHE STRONG MARKET POSITION IN EUROPE

EMEASHARE OF SALES IN 2016

75 %

FOCUS ON PREMIUM PAPERBOARDSEGMENTS IN THE ASIA-PACIFIC REGION

APACSHARE OF SALES IN 2016

8 %

Regional goals and operating models

In 2016 the y-o-y growth was: +14% in Americas, +10% in EMEA, +24% in APAC

• The goal is to remain Europe’s biggest producer of folding boxboard and white fresh fibre linerboards

• The biggest growth drivers are – Strong and long-term customer relationships – Innovative high-performance product portfolio to replace

other packaging materials– Top-class customer service concept

• In EMEA, Metsä Board’s paperboard delivery volumes grew by 10% in 2016 compared to 2015


Maintaining a strong market position in Europe

Metsä Board uses only fresh fibres from sustainably managed northern forests.

EMEAShare of sales

75%

REGIONAL GOALS AND OPERATING MODEL:

• The most rapid growth is sought in the Americas, where most of Husum’s new capacity in folding boxboard is targeted

• The biggest growth drivers are– Limited local supply in folding boxboard– Due to strong consolidation, converters without own paperboard

production are looking for alternatives• In folding cartons their share is 40–50%

– Strong demand in food service board– Growing environmental awareness

• In Americas, Metsä Board’s paperboard delivery volumes grew by 14% in 2016 compared to 2015


Growth in the Americas in the coming years

Paperboard offers a sustainable option for plastics such as styrofoam in food service applications.

AmericasShare of sales

17%


• Metsä Board aims at moderate growth, primarily in cooperation with brand owners

• Responsible consumer goods companies promote good packaging– Consistent quality– Traceable raw materials– Responsible production

• Due to the local overcapacity in Asia, the timing is not good for aggressive growth

• In APAC, Metsä Board’s paperboard delivery volumes grew by 24% in 2016 compared to 2015


Focus on premium segments in the Asia-Pacific region

Global consumer goods companies are not willing to change paperboard suppliers easily in the high-quality segments.

APACShare of sales

8%


Result for January−March 2017

• Good demand for high-quality paperboards continued

• Stable or rising market price levels• Metsä Board’s paperboard and market pulp

deliveries grew from the previous quarter• All Finnish mills performed well, good

momentum in linerboard business• No major maintenance shutdowns during the

first quarter• Husum still had a negative impact on profitability


Q1 2017 in summary


Key financialsQ1/17 Q4/16

ChangeQ1/17

vs. Q4/16Q1/16

ChangeQ1/17

vs. Q1/162016

Sales EUR million 445 422 +5% 436 +2% 1,720

EBITDA, comparable EUR million 69 53 +30% 58 +19% 231

Operating result, comparable EUR million 45 33 +36% 35 +29% 138

% of sales % 10.2 7.8 8.0 8.0

Result before taxes, comparable EUR million 40 23 +74% 30 +33% 107

Earnings per share EUR 0,10 0,05 +100% 0.07 +43% 0.26

ROCE, comparable % 10.6 7.7 8.3 8.1

Capex EUR million 19 43 -56% 54 -65% 162

Cash flow from operations EUR million 26 55 -53% -22 77

IB Net debt, at the end of period EUR million 458 464 -1% 412 +11% 464

Total paperboard deliveries grewAll-time high monthly level in March 2017

210 203 204 213 224 224 227 250 266 245 265

120 111 130 141 137 131 142148 148

143163

0

60

120

180

240

300

360

420

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Folding boxboard Fresh fibre linerboard

1,00

0 to

nnes

Growth in paperboarddeliveries:

+10% Q1/17 vs. Q4/16

+16% Q1/17 vs. Q1/16

+12% FY16 vs. FY15


FY 2015:1.4 mill. tonnes

FY 2016:1.6 mill. tonnes

Sales increased and profitability improved

Sales, EUR million

526 522 498 462 436 423 440 422 4450

100

200

300

400

500

600

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

43 47 55 35 35 36 34 33 45

8,2 %9,0 %

11,0 %

7,6 % 8,0 %8,5 %

7,7 % 7,8 %

10,1 %

0%

2%

4%

6%

8%

10%

12%

0

10

20

30

40

50

60

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117


Comparable operating result, EUR million and %

FY 2015:EUR 2,008 million

FY 2016:EUR 1,720 million

FY 2015:EUR 180 million

FY 2016:EUR 137 million

EU

R m

illio

n

EU

R m

illio

n

3345

01020304050

Q4 2016 Q1 2017

Operating result, EUR millionQ4 2016 vs. Q1 2017


Impact on Q1 2017 operating resultvs. Q4 2016 and Q1 2016

3545

01020304050

Q1 2016 Q1 2017

Operating result, EUR millionQ1 2016 vs. Q1 2017

+ Growing delivery volumes in paperboardand market pulp, no major maintenanceshutdowns, increased price levels in coatedWTKL in the US and in market pulp

- Sales mix in Husum’s FBB and product mix in Husum’s white linerboards, increasedlatex price

+ Positive development in Finnish mills, discontinued paper operations, positive impactfrom FX rates after hedges

- Increased latex price

EBIT-%8.0

EBIT-%10.2EBIT-%

7.8

EBIT-%10.2

WTKL = white-top kraftlinerFBB = folding boxboard

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Q1/13 Q2/13 Q3/13 Q4/13 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

Comparable ROCE, %Investor presentation Q1/201744

Higher profitability improved ROCE-%

Target >12% from 2017 onwards

Cash flows clearly positiveQ1 2017 cash flow from operations impacted by changes in working capital, advancepayments of employment pension contributions, and dividend from Metsä Fibre

33 5693

66

-22 -22

67 55 269 8 45 8

-76-50

49 17 7

250214

256 247

193

11589 78

126

188

119 118

70

-15

-73

-69

-60

23

-100

-50

0

50

100

150

200

250

300

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

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

EUR

milli

on


Balance sheet remained stable

333 464 412 541 488 464 458

1,2

2.0

1,5

2,1 2,1 2.0 1,9

0

1

2

3

0

200

400

600

2015 2016 3/16 6/16 9/16 12/16 3/17

Interest-bearing net debt, EUR millionInterest-bearing net debt / EBITDA (rolling 12-month)

Interest-bearing net debt / comparable EBITDA

333 464 412 541 488 464 458

32%

44% 42%

54%49%

44% 44%

0

0,1

0,2

0,3

0,4

0,5

0,6

0

200

400

600

2015 2016 3/16 6/16 9/16 12/16 3/17

Interest-bearing net debt, EUR millionNet gearing, %

Net gearing, %


Financial target in net gearing is a maximum of 70%

• Rising capacity utilisation rate in the FBB productionline (now 70%) will decrease production costs per tonne produced

• FBB production line fully utilised by the end of 2018• Total FBB deliveries to Americas will increase• PE-coated paperboards generate sales in a new

customer segment• The volumes of coated linerboards will grow


High potential to improveprofitability in Husum


Near-term outlook• Good demand for fresh fibre paperboards, pulp

market expected to remain healthy• Price levels in FBB are expected to be stable,

several linerboard producers have announced price increases

• Metsä Board’s paperboard delivery volumes are expected to increase

• Several maintenance shutdowns at the Finnish mills in Q2, rising latex price increasing production costs

Metsä Board's comparable operating result for the second quarter of 2017 is expected to remain roughly on the same level as in the first quarter of 2017.


Profit guidance

• Good overall performance in the firstquarter of 2017

• High potential to improve profitability in Husum

• Extrusion coating line in Husum offers improved availability and competitive products, especially in the food service segment

• In 2017, focus is on sales of the new paperboard capacity


Summary

Balance sheet and financing


Strong balance sheet

Equity ratio, %

41% 39%

46% 48% 47%

0%

10%

20%

30%

40%

50%

2013 2014 2015 2016 3/2017

70%

51%

32%

44% 44%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2013 2014 2015 2016 3/2017

Net gearing, %

597 427 333 464 458

2,9

1,8

1,2

2,0

1,9

0

1

2

3

4

0

200

400

600

2013 2014 2015 2016 3/2017

Net debt, EUR million

Net debt/EBITDA (rolling 12 months)

Net debt, EUR million and Net debt / Comparable EBITDA

Debt structure and liquidity31 March 2017

223

149128

23

137

Bonds

Loans fromfinancial institutions

Pension loans

Finance leases andother loans

Other short-termloans

199

100

102

Cash and cashequivalentsRevolving creditfacilityUnraised pensionloans

Interest-bearing debt, total EUR 660 million

Available liquidity, total EUR 401 million

Average maturity of long-term loans on 31 March 2017 was 2.2 years. 53 Investor presentation

Q1/2017


Maturity schedule in long-term IB debt

105

35

257

174

1 2

100 102

0

50

100

150

200

250

300

2017 2018 2019 2020 2021 >2021

Long-term interest-bearing debt (total EUR 469 million) and committed undrawn credit facilities 31 March 2017

Long-term interest bearing liabilities Committed undrawn credit facilities

EUR million


Debt programmes 31 March 2017Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity

EUR 225 million bond Issue 2014 225 225 4.5 2019

Syndicated credit facility 2014 250 150 3.2 2020

EUR 51 million bilateral loans 51 51 1.4 2017–2020

EUR 24 million finance leases 24 24 2.3 2017–2024

EUR 230 million pension loans 230 128 4.5 2017–2020

Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*), % Maturity

Revolving credit facility 2014 100 0 - 2020

Pension loan facilities 230 128 4.5 -

Short-term funding programmes

Metsä Group internal short-term limit 150 0 - 0–12 months

Metsä Group Treasury funding programmes

EUR 150 million domestic CP programme 150 0 - 0–12 months

Metsä Board’s significant debt securities issued and outstanding at 31 March 2017

*) 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 2017 is 3.3%.

Metsä Board’s principal long-term liquidity reserves at 31 March 2017


Steadily decreasing net financial costs

56 39 32 31 5

4,6

4,2

3,8

3,3 3,3

3,03,23,43,63,84,04,24,44,64,8

0

20

40

60

2013 2014 2015 2016 3/2017

Net financial costs, EUR million

Average interest rate at the end of period, %

EUR million %

• Net financials in Q1 were EUR -5 million (Q4/16: EUR -10 million)

• Net exchange gains and lossesamounted to EUR 0 million(EUR -4 million)

• Impact of FX rate changes after hedges in Q1 2017: flat in Q1/17 vs. Q4/16, EUR 5 million positive in Q1 2017 vs. Q1 2016

• Hedging policy from 1 January 2017 onwards– 100% of balance sheet position

– 50% of annual net FX flows

FX exposure and sensitivities

58 %34 %

6 %2 %USD

SEK

GBP

Othercurrencies

Annual transaction exposureEUR 1.2 billion

FX sensitivities before hedges

10% strengthening of foreign currency vs. EUR will have an impact on Metsä Board’s EBIT of

Currency Next 12 months

USD, $ EUR +70 million

Swedish krona EUR -40 million

GBP, £ EUR +7 million


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

58

Metsä Board 's credit rating

Moody’sStandard & Poor’s

BB+ | Ba1

Stable

Positive

BB | Ba2

BB- | Ba3

B+ | B1

B | B2

B- | B3

CCC+ | Caa1

CCC | Caa2


Capex and Husuminvestment programme

• Investments in January–March were EUR 19 million (Q1/16: EUR 54 million)

• Estimated capex in 2017 is EUR 65–70 million

Clearly lower capex in 2017

0

30

60

90

120

150

180

2010 2011 2012 2013 2014 2015 2016 2017E

Maintenance capex Growth capex Depreciation

EUR million


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


Husum investment programme

Folding boxboard production

• Capacity approximately 400,000 t/a

• Deliveries mainly to Americas and food service globally

Linerboard production

• Capacity approximately 270,000 t/a

• Deliveries to Europe and Americas Capacity changes 2014 vs. 2016:

• Paperboard capacity +670,000 tn/a

• Paper capacity -600,000 tn/a

• Launched at the end of 2014• Two paper machines were shut down in 2015 • One paper machine converted to produce linerboard (BM2)• New folding boxboard machine (BM1) started up on February 2016• Enhancements to the pulp mill and the mill site’s own port


New state-of-the-art extrusion coating line started up at Husum

• EUR 38 million investment, capacity of 100,000 t/a• PE-coated*) paperboard is an alternative to plastics• Targeted for food packaging and food service

applications• In 2016, Metsä Board introduced PE-coated

paperboards• Supports growth in a new customer segment• Metsä Board continues development work on other

innovative barrier solutions including the use of bio-based materials

*) PE=polyethylene, the most common barrier material used against moisture and grease

• Net capacity increase at the site is approximately 800,000 t/a

• Total capacity is 1.3 million t/a– Investment cost roughly EUR 1.2 billion and start up in Q3 2017

• Capital invested by Metsä Board in Q2 2016 was EUR 24.9 million– No other financial commitments in the project– Metsä Board’s holding in Metsä Fibre remains at 24.9%

• Metsä Board’s pulp balance from 2018 onwards is 500,000–600,000 t/a long

– Result contribution is driven by the market price of softwood chemical pulp

– Reserve to grow paperboard business further in the future while maintaining self-sufficiency in pulp


Metsä Board’s associated company Metsä Fibre builds a bioproduct mill

Production, capacities and sourcing

Paperboard mills• Husum (FBB and linerboard)• Kemi (linerboard)• Kyro (FBB)• Tako (FBB)• Simpele (FBB)• Äänekoski (FBB)

Pulp mills• Husum (chemical pulp)• Joutseno (BCTMP)• Kaskinen (BCTMP)


Production locations

Äänekoski

Simpele

Joutseno

Tako

Kyro

KaskinenHusum

Kemi


Paperboard capacity

Town Country Machines Folding boxboard

White freshfibre linerboard Total

Tampere (Tako) Finland 2 210 210

Kyröskoski (Kyro) Finland 1 190 190

Äänekoski Finland 1 240 240

Simpele Finland 1 280 280

Kemi Finland 1 410 410

Husum Sweden 2 400 270 670

Total 8 1,320 680 2,000


Pulp capacityMetsä Board pulp mills Country Chemical pulp BCTMP Total

Husum Sweden 730 730

Joutseno Finland 320 320

Kaskinen Finland 340 340

Total 730 660 1,390

Metsä Fibre pulp mills Country Chemical pulp BCTMP Total

Äänekoski Finland 530 530

Kemi Finland 610 610

Rauma Finland 650 650

Joutseno Finland 690 690

Total 2,480 2,480

Deliveries by region in 2016

Folding boxboard


Fresh fibre linerboard

48%

25%

16%

11%

Western Europe

Eastern Europe

Americas

Asia and Pacific

60%

7%

32%

1%

Own generation

20%

Through PVO shareholding

32%

Purchased energy

45%

Outsourced generation

3%

Wood-based60%

Nuclear power22%

Gas7%

Hydro4%

Coal2%

Peat2% Oil

2%

Sweden 38%

Finland31%

Baltic countries18 %

Russia13%

Sourcing 2016Electricity sourcing

(total 2,438 GWh)


Primary energy used(total 12.0 TWh)

Wood sourcing by country (total 4.6 million cubic metres)


Cost structure in 2016Delivery costs

16%

Wood26%

Chemicals, pigments and fillers

14%

Energy12%

Other variables3%

Personnel 14%

Other fixed15%

Fixed costs

Variablecosts

Sustainability

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 goodmanufacturing 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 boardproduction is mostly integrated in pulp production

Waste waters are always carefully cleanedbefore 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 our customers

99% of water used in the productionprocess 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 waterin its production

LOGISTICSENSURE THE SUSTAINAINABILITY OF MAIN LOGISTIC FLOWS

PERFORMANCE 2016−2017 100%

SAFETY AT WORKLOST-TIME ACCIDENTS FREQUENCY ANNUALLY

PERFORMANCE 2016 -18.9%

-10%ENERGYENERGY EFFICIENCY IMPROVEMENT2009−2020

PERFORMANCE 2016 7.8%

12% -17%RESOURCE EFFICIENCYPROCESS WATER USE PERPRODUCT TONNE 2010−2020

PERFORMANCE 2016 -14%

Metsä Board’s sustainability targets

>80%

WOODTHE SHARE OFCERTIFIED WOOD

PERFORMANCE 2016 81%

-30%

CLIMATEFOSSIL CO2 EMISSIONS PER PRODUCT TONNE 2009−2020

PERFORMANCE 2016 -45%

<3%WELL-BEINGSICKNESS ABSENTEEISM

PERFORMANCE 2016 4.1%

BIOENERGY SHARE OF TOTAL PURCHASED ENERGY 51%


• CDP Water A List– For the second year in a row Metsä Board was globally the

only forest company chosen to the A List

• CDP Climate A List– Only 9% of the companies were chosen on the list

• CDP Forest programme– Leadership status

• CDP Supply chain programme– Metsä Board participates together with its customers– L’Oréal nominated Metsä Board to its best performer as

packaging material supplier in 2015

75

Metsä Board scored again highin CDP in 2016


EU Commission– In December 2016, announced plans to regulate printed food

contact materials (FCMs) on 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 (exceptions for example eggs)– No regulation of mineral oil but concentration limits of certain

polyaromatic hydrocarbons micrograms/kg food has been set

Draft German mineral oil regulation– 4th ordinance draft is expected to be published soon– The earlier drafts were focusing on mineral oil migration from

recycled fibre based paperboards to food. The new draft is notexpected to change in this respect

76

Increased regulation to ensureproduct safety


Shares and owners

Market cap and foreign owners31 March 2017

Ownership distribution31 March 2017

Market cap and ownership distribution

0

4

8

12

16

20

24

0

500

1 000

1 500

2 000

2 500

2012 2013 2014 2015 2016 1-3/2017

Market cap, EUR million

Share of foreign owners, %

42 %

25 %

18 %

15 % MetsäliittoCooperative

Domestic institutionalinvestors

Domestic privateinvestors

Foreign owners

EUR million

*) Metsäliitto Cooperative has 61% of voting rights

*)

78

%



Ownership structure on 31 March 2017

42 %

16 %

18 %

13 %

6 %

2 % 3 %

MetsäliittoCooperative

Foreign owners*

Households

Public sectororganisations

Finance andinsurancecompaniesNon-profitorganisations

Other companies

61 %15 %

11 %

6 %

4 %

2 %1 %

MetsäliittoCooperative

Public sectororganisations

Households

Foreign owners*

Non-profitorganisations

Finance andinsurance companies

Other companies

Shares, % (total no. of shares 355,512,746)

Votes, % (total no. of votes 1,037,530,115)

* incl. nominee registered

Source: Euroland

Metsä Board has two series of shares: 35,895,651 A-shares and 319,617,095 B-shares.A-share entitles to 20 votes and B-share entitle to 1 vote at a General Meeting.

Appendix

81

Corporate Management Team

Mika JoukioCEO

Chairman in CMT since 2014Share ownership 261,884

Ari KivirantaSVP, Production and Technology

Member in CMT since 2014Share ownership: 16,236

Jussi NoponenCFO


Sari PajariSVP, Business Development


Seppo PuotinenSVP, Marketing and Sales

Member in CMT since 2005Share ownership 107,000

Susanna TainioSVP, HR

Member in CMT since 2015Share ownership 20,505


Share ownerships are B-shares

METSÄ TISSUE

Tissue and cookingpapers

Sales:

EUR 1.0 billionPersonnel:

2,700Metsäliitto Cooperativeholding 100%

METSÄ WOOD

Wood Products

Sales:


1,520Metsäliitto Cooperativeholding 100%

METSÄ FOREST

Wood Supply and ForestServices

Sales:


860Metsäliitto Cooperativeholding 100%


METSÄ BOARD

Paperboard

Sales:


2,500Metsäliitto Cooperativeholding 42%, 61% of votes

METSÄ FIBRE

Pulp and SawnTimber

Sales:


1,230Metsäliitto Cooperativeholding 50.2%, Metsä Board 24.9%,Itochu Corporation 24.9%

METSÄ GROUP | Sales EUR 4.7 billion | Personnel 9,300

METSÄLIITTO COOPERATIVE | Group’s parent company | Owned by 104,000 Finnish forest owners

2005 Structural change starts Paper production over 80% of sales -> Decision to exit paper business

2006 Strategic review launchedRestructuring and focused investment programme initiated, focus on paperboard

2007–2013 Streamlining and focused investmentsPaper capacity reduction from about 5 million to 0.8 million annual tonnesMajor divestments incl. Graphic Papers and Map MerchantsPaperboard capacity increases

2013 Strategic review completed Clear focus on paperboard Paper production 25% of sales

2015 Strong market position in main productsEurope’s leading producer of folding boxboardThe world’s leading manufacturer of coated white fresh fibre linerboards

2016 Final exits from non-core businessesFine paper production at Husum mill and wallpaper base production at Kyro mill endedPaperboard capacity 2 million t/a


True success story


M&A activity 1997-2015

100 000 B2 shares in

PVO

Acquisitions

Divestments

Biberist Paper Mill

UK Paper

Modo Paper

Zanders

ChemicalsBusiness

BotniaWood

CorrugatedPackaging

MD Papier Metsä Tissue

Albbruck SavonSellu

Forestia

KemiartLiners (53 %)

8% in Botnia

PSM

9% in Botnia

Cartonplants

Map

New Thames

MB Uruguay

Graphic Papers

Part of Reflex

Halleinmill

1997 20001998 1999 2001 2002 2003 2004 2005 2006 2007 20092008 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


Significant Divestments EUR 3.7 billion in assets divested since 2001

* Cash portion**Incl. pension liabilities


5624 4440 3236 2432 2605 2485 2108 2019 2008 2008 1720

0,8 1,1

‐1,1‐6,2

6,6

2,43,6

5,2

6,8

9,0

8,0

‐7,0

‐5,0

‐3,0

‐1,0

1,0

3,0

5,0

7,0

9,0

0

1000

2000

3000

4000

5000

6000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sales, EUR million EBIT‐%

%

Sales and EBIT-% development

Katri SundströmVice President, Investor relations

Tel +358 400 976 [email protected]

87

Contact information


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