Metsa Group, presentation January-March 2017 Q1 results

Metsä Group Interim Report Q1/2017

Kari JordanPresident and CEO

4 May 2017

• Sales EUR 1,216 million (Q1/2016: EUR 1,156 million)• Operating result* EUR 128 million (EUR 109 million)• Operating result of sales* 10.5% (9.5%)• Return on capital employed* 12.5% (10.6%)• Sales grew mainly due to increased delivery volumes• Operating result improved mainly by favourable development

of the paperboard business

4.5.2017 Metsä Group2

Business developed as expected

Metsä Group – Q1

*comparable

• The market prices of long-fibre and short-fibre pulp increased• The capacity utilisation rate of the folding boxboard machine

started up in 2016 at Husum, Sweden, increased• Metsä Tissue commenced the renewal of the recycled pulp

plant at the Mänttä mill in Finland• Metsäliitto Cooperative acquired the 9% share in Metsä Tissue

Corporation from Jozef Antošík• Metsä Wood sold its project business located in Pälkäne,

Finland, to Lapwall Oy


Events in the first quarter

Metsä Group – Q1


1,254 1,2651,204

1,248 1,2551,330

1,225 1,2051,156 1,184 1,143 1,175 1,216

0

200

400

600

800

1 000

1 200

1 400

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

Sales quarterly

Metsä Group – Q1

EUR million


Operating result

Metsä Group – Q1

10592

104117

129137

149

123109

120

103 107

128

70

160

103

84

118

154142

128

107

119

107110

131

0

20

40

60

80

100

120

140

160

180

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

Comparable operating result Operating result (IFRS)

EUR million


5364 68 71

8994

73

87

105

92104

117129

137149

123

109120

103 107

128

0

20

40

60

80

100

120

140

160

Q1/

12 Q2

Q3

Q4

Q1/

13 Q2

Q3

Q4

Q1/

14

Q2

Q3

Q4

Q1/

15

Q

2

Q

3

Q

4

Q1/

16

Q

2

Q

3

Q

4

Q1/

17

Q2

Q

3

Q

4

Comparable operating result

Metsä Group – Q1

EUR million

Change in comparable operating result


Metsä Group – Q1

EUR million

Comparable operating result 1–3/2016 109.5

Sales prices -22.6

Sales volumes 30.5

Exchange rates 1.6

Raw materials and energy -2.1

Employee costs 10.6

Maintenance and other -5.9

Others total 6.3 18.4

Comparable operating result 1–3/2017 127.9

Items affecting comparability Q1/2017


Metsä Group – Q1

EUR million Q1/2017

Operating result (IFRS) 131.2

Items affecting comparability:

Metsä Wood / sale of the project business 3.3

Items total +3.3

Comparable operating result 127.9


Comparable ROCE

Metsä Group – Q1

9.7

12.3

13.5

10.6

12.5

0

2

4

6

8

10

12

14

16

Q1/2013 Q1/2014 Q1/2015 Q1/2016 Q1/2017

%

Target >10 %


Equity ratio

Metsä Group – Q1

37.9 37.9

43.2 43.9 44.1

0

5

10

15

20

25

30

35

40

45

50

12/2013 12/2014 12/2015 12/2016 3/2017

%


Interest-bearing net liabilities

Metsä Group – Q1

1,510

938

610

1,033

1,226

0

250

500

750

1 000

1 250

1 500

1 750

12/2013 12/2014 12/2015 12/2016 3/2017

EUR million


Capital expenditure

Metsä Group – Q1

214143

492

758

1270

100

200

300

400

500

600

700

800

1–12/2013 1–12/2014 1–12/2015 1–12/2016 1–3/2017

EUR million

Full-year estimate

Income statement


Metsä Group – Q1

EUR million Q1/2017 Q1/2016 ChangeSales 1,216.1 1,155.6 60.6

Other operating income 14.0 8.3 5.7

Operating expenses -1,036.3 -990.8 -45.6

Depreciation and impairment losses -62.7 -66.3 3.6

Operating result 131.2 106.8 24.4

Comparable operating result 127.9 109.5 18.4Share of results from associated companies and joint ventures

14.0 -0.1 14.2

Exchange gains and losses 1.4 -1.0 2.4

Other net financial items -17.1 -17.8 0.8

Result before taxes 129.5 87.8 41.8

Key figures


Metsä Group – Q1

Q1/2017 Q1/2016 MuutosReturn on capital employed, % 12.8 10.3 2.5

Comparable return on capital employed, % 12.5 10.6 1.9

Return on equity, % 16.3 11.3 5.0

Comparable return on equity, % 15.7 11.8 3.9

Equity ratio, % 44.1 42.8 1.3

Net gearing ratio, % 46 35 11

Interest-bearing net liabilities, EUR million 1,226 847 379

Capital expenditure, EUR million 127 143 -16

Personnel at end of period 9,310 9,512 -202

Cash Flow Statement I


Metsä Group – Q1

EUR million Q1/2017 Q1/2016

Cash flow from operating activities

Result for the period 106.7 68.3

Adjustments to result for the period 80.6 103.0

Interest received 1.0 0.9

Interest paid -12.5 -12.5

Dividends received 0.8 0.7

Taxes -19.0 -25.7

Other financial items, net -9.9 0.3

Change in working capital -188.7 -202.1

Net cash flow from operating activities -41.0 -67.1

Cash Flow Statement II


Metsä Group – Q1

EUR million Q1/2017 Q1/2016Net cash flow from operating activities -41.0 -67.1

Purchase of shares 0.0 0.0Acquired shares from non-controlling interests -30.7 0.0Investments -127.5 -142.9Sales of assets and others 11.7 0.8Changes in members' capital and other capital 18.0 13.9Interest on members' capital and dividends paid -31.1 -32.9Change in long-term loans and committed facilities 42.0 -4.3

Change in cash and cash equivalents -158.7 -232.5

Cash and cash equivalents at beginning of the period 895.1 1,120.8Translation differences and others 0.4 0.0Change in cash and cash equivalents -158.7 -232.5

Cash and cash equivalents at end of the period 736.8 888.4


Personnel

Metsä Group – Q1

10,736 10,4109,599 9,300 9,310

0

2 000

4 000

6 000

8 000

10 000

12 000

12/2013 12/2014 12/2015 12/2016 3/2017

Wood Supply and Forest Services

Wood Supply and Forest Services


Metsä Forest – Wood Supply and Forest Services

EUR million Q1/2017 Q1/2016 Change

Sales 432.6 401.2 31.5

Other operating income 0.8 2.4 -1.6

Operating expenses -424.0 -394.9 -29.1

Depreciation and impairment losses -0.9 -0.8 -0.1


Items affecting comparability, total - - -

Comparable operating result 8.5 7.8 0.7

% of sales 2.0 1.9 0.1

Steady supply of wood and higher purchasing volumes• Metsä Forest delivered a total of 8.7 million

cubic metres of wood (8.3)• In Finland, the supply of wood was steady,

and stumpage prices remained stable • Purchasing volume of wood was higher than

during the corresponding period in the previous year

• Sales of forest management services continued to grow

• 25% of wood bought from private forests was purchased electronically

• 35% of forest management services was sold electronically


Comparable operating result EUR million

Metsä Forest – Wood Supply and Forest Services

8.7

6.9 7.06.3

7.8

6.5

7.7

8.98.5

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Wood Products Industry

Wood Products Industry


Metsä Wood – Wood Products Industry

EUR million Q1/2017 Q1/2016 ChangeSales 120.2 121.4 -1.2


Operating expenses -107.2 -110.6 3.4



Items affecting comparability, total -3.3 0.4 -3.7


% of sales 8.9 6.8 2.1

Strong demand for wood products

• Delivery volumes and sales of Metsä Wood's Kerto® LVL products grew, especially in North America and the Middle East

• Delivery volumes and sales of birch and spruce plywood products grew, particularly in Northern Europe

• Metsä Wood is building a birch plywood mill in Pärnu, Estonia. The new mill will begin production in the second half of 2018

• Metsä Wood sold its project business located in Pälkäne, Finland, to Lapwall Oy



Metsä Wood – Wood Products Industry

4.5

7.18.0

8.4 8.2

13.2

9.08.3

10.7

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Pulp and Sawn Timber Industry

Pulp and Sawn Timber Industry


Metsä Fibre – Pulp and Sawn Timber Industry

EUR million Q1/2017 Q1/2016 ChangeSales 422.0 408.8 13.2




Operating result 54.5 61.2 -6.7


Comparable operating result 54.5 61.2 -6.7

% of sales 12.9 15.0 -2.1


Price of pulp (PIX) 2009–Q1/2017


350

450

550

650

750

850

950

1050

350

450

550

650

750

850

950

1050

´09 ´10 ´11 ´12 ´13 ´14 ´15 ´16 ´17

Hardwood/EUR Softwood/EUR Hardwood/USD Softwood/USD

USD EUR

Source: Foex

Demand for long fibre pulp remained good

• Demand for long-fibre pulp was good. In China the demand was stronger than expected

• The price of long-fibre pulp grew about 2% and short-fibre 9% in Europe during Q1 2017

• The bioproduct mill’s completion rate at the end of March was roughly 90%. Commissioning and test-run phase is ongoing

• Production and sales volumes of sawn timber increased according to plan

• The prices of sawn timber increased but remained at a low level




82.0

95.6

83.479.7

61.2

53.246.4

53.7 54.5

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Paperboard Industry

Paperboard Industry


Metsä Board – Paperboard Industry



Operating expenses -378.9 -386.1 7.2

Depreciation and impairment losses -23.6 -22.9 -0.7


Items affecting comparability, total - 2.3 -2.3


% of sales 10.2 8.0 2.2


600650700750800850900950

100010501100

2011 2012 2013 2014 2015 2016 2017

Folding boxboard White-top kraftliner

Prices of folding boxboard and white-top krafliner in Europe 2011–Q1/2017

Source: Pöyry Management Consulting ja FOEX Indexes Ltd

EUR/ tonne


Delivery volumes increased and profitability improved• Operating result was improved mainly by

increased folding boxboard and linerboard delivery volumes

• Average prices of the paperboards produced in Finland remained roughly at the level of the comparison period

• Capacity utilisation rate of Husum's folding boxboard machine in Sweden was appr. 70%. The aim is 75% during 2017, corresponding appr. 300,000 tonnes

• New extrusion coating line at the Husum mill started up in April



43.247.0

54.6

35.1 35.0 35.834.0 32.8

45.2

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17


Tissue and Cooking Papers

Tissue and Cooking Papers


Metsä Tissue – Tissue and Cooking Papers








% of sales 7.0 5.5 1.5

Operating result of Tissue and Cooking Papers improved • Metsä Tissue’s sales grew primarily due to

increased delivery volumes• Operating result was positively impacted by

the higher sales volume, the lower market price of fresh fibre and the strengthening of the Norwegian krone

• Result was impacted negatively by the price increase of recycled fibre and the weakening of the Swedish krona and the British pound

• Metsä Tissue commenced the renewal of the recycled pulp plant at the Mänttä mill. It will increase production efficiency and prolong the pulp plant's lifetime



Metsä Tissue – Tissue and Cooking Papers

15.8

7.6

13.2

18.6

13.5 13.2

15.8

20.6

17.6

0,0

5,0

10,0

15,0

20,0

25,0

Q1/

15

Q2/

15

Q3/

15

Q4/

15

Q1/

16

Q2/

16

Q3/

16

Q4/

16

Q1/

17

Q2/

17

Q3/

17

Q4/

17

Summary

Outlook for the business areas 1/2Wood Supply and Forest Services• Wood demand will focus on felling sites to be harvested when the ground is unfrozen and, in terms of energy wood,

mainly on crown wood • The sales of forest management services are expected to remain good

Wood Products• Market demand for wood products will remain good, and this will be reflected in the order book level, which will be

higher than in the previous year, particularly in Kerto® LVL products • The outlook for plywood products is likewise positive. Construction in the UK is expected to remain at a good level,

and delivery volumes in the second quarter are expected to grow, supported by the season

Pulp and Sawn Timber• Demand and supply in the pulp markets are well-balanced in both the Asian and European markets

• Demand for spruce sawn timber will remain good in all of the main markets, with demand in China being particularly strong

• The oversupply situation in pine sawn timber has eased off, and market balance has improved


Summary

Outlook for the business areas 2/2Paperboard• Global demand for high-quality consumer packaging paperboard made from fresh fibre is expected to

continue to grow • Metsä Board's paperboard deliveries in April–June are expected to grow from the previous quarter. The

growth is supported by Husum's new folding boxboard production

Tissue and Cooking Papers• In the tissue and cooking paper markets, demand is expected to remain stable in all market areas• Demand for tissue paper will increase particularly in Eastern Central Europe, and demand for cooking

papers in Asia


Summary

• Metsä Group’s comparable operating result is in the second quarter of 2017 expected to be roughly at the same level as in the first quarter of 2017


Near-term outlook

Summary

Date post:	22-Jan-2018
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