Mets Board Investor presentation January-September 2016 Contents - - PowerPoint PPT Presentation

Metsä Board Investor presentation January-September 2016

1-9/2016 2

Contents

Investment highlights 3 Strategic cornerstones and financial targets 12 Operating environment and market position 22 Q3/2016 results and outlook 33 Balance sheet and funding 42 Investments 50 Production, capacities and sourcing 57 Sustainability 65 Owners 69 Appendix 72 Contact information 78

Investment highlights

• Market leader in folding boxboard in Europe and

global market leader in coated white top kraftliner

• Strong fibre know-how and self-sufficiency in pulp
• Sales in 2015 EUR 2.0 billion and comparable
• perating result EUR 180 million
• 2,600 employees in 23 countries
• Global sales to over 100 countries and eight

production units in Finland and Sweden

1-9/2016 4

Metsä Board in brief

Sales split 2015

Paperboard* Paper

Sales by region 2015

EMEA Americas APAC

*) Includes market pulp

5

High-performance packaging materials

Folding boxboards, white-top kraftliners and fully bleached linerboards Consumer goods Retail-ready Food service

1-9/2016

• Lightweightness

– Even 30% lighter than competing grades (e.g. SBB, WLC)

• Excellent printability and runnability
• Purity and safety
• Bioenergy

– More than 60% of the energy Metsä Board uses comes from renewable resources

• Wood from known origin

– Fibres used in production are sourced from sustainably managed northern forests

6

Benefits of Metsä Board paperboards

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

• f chemical pulp, which maximizes the

strength of the board.

Folding boxboard is the stiffest yet lightest paperboard grade

1-9/2016

1-9/2016 7

Comparable EBITDA development

180 185 208 236 283

7,2 % 8,8 % 10,3 % 11,8 % 14,1 %

0% 2% 4% 6% 8% 10% 12% 14% 16%

50 100 150 200 250 300 2011 2012 2013 2014 2015 EUR million

Strong profitability development

Comparable ROCE-%

1-9/2016 8

Comparable EBIT-%

3,4 4,8 6,4 9,1 11,3

2 4 6 8 10 12 2011 2012 2013 2014 2015 %

2,4 3,6 5,2 6,8 9,0

2 4 6 8 10 2011 2012 2013 2014 2015 %

Target over 12% from 2017

1-9/2016 9

Strong continuing improvement in productivity

1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 1 000 1 300 1 600 1 900 2 200 2 500 2 800

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

Production capacity/employee Number of employees

Production capacity (tonnes) / employee at current mills

• No. of

employees Production capacity/ employee

• High investment costs
• Limited availability of high yield pulp (e.g. BCTMP)
• Leading global consumer goods companies 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

1-9/2016 10

High threshold for new producers to enter high-quality paperboard segment

Vaihda kuva laadukas kartonki

1-9/2016 11

Metsä Board’s paperboard business profitability (EBIT-%) and its’ peers

Strategic cornerstones and financial targets

Values

• Responsible profitability
• Reliability
• Cooperation
• Renewal

Strategic cornerstones

• Focus
• Growth
• Profitability

1-9/2016 13

Metsä Board’s vision is to be the preferred supplier

• f 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

1-9/2016 14

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,

• perations 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

• ur market position further and maintain healthy price

levels

1-9/2016 15

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

1-9/2016 16

Growth

Financial targets

Comparable ROCE, %

1-9/2016 17

Net gearing, %

3,4 4,8 6,4 9,1 11,3

2011 2012 2013 2014 2015

106 72 70 51 32

2011 2012 2013 2014 2015

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

• Metsä Board’s dividend payout target is at least 1/3 of EPS
• Average pay-out ratio during 2012–2015 has been 40%

1-9/2016 18

Dividend

0,06 0,09 0,12 0,17

0,02 0,04 0,06 0,08 0,1 0,12 0,14 0,16 0,18 0,2

2012 2013 2014 2015

1-9/2016 19

Targeted average annual growth rate exceeds clearly the market growth rate 3-5% p.a.

250 500 750 1 000 1 250 1 500 1 750 2 000 2011 2012 2013 2014 2015 2018 target Fresh fibre linerboard Folding boxboard

1,000 tonnes

Paperboard deliveries

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Most important growth area is Americas

50 100 150 200 250 300

2011 2012 2013 2014 2015 2018 target Folding boxboard Fresh fibre linerboard

300 250

1,000 tonnes

Actual and targeted deliveries to Americas

• 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

1-9/2016 21

Main priorities and actions to achieve financial targets

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

• ther 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

• bligations
• 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 fresh fibre paperboard packaging market is about USD 110 billion

The total packaging market is USD 800 billion

1-9/2016 24

Estimated average annual growth rate

• f fresh fibre paperboard is 3–4%

Fresh fibre paperboard Other wood fibre based materials Non-fibre based materials 20 40 60 80 100 120 140 2013 2014 2015 2018E USD bn

Source: Metsä Board estimates

1-9/2016 25

Global folding boxboard market is about 9 Mt/a

Total cartonboard market is about 36 Mt/a*

Source: Metsä Board estimates

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

APAC

20 Mt/a

EMEA

8 Mt/a

North America

6 Mt/a

• Lat. Am.

2 Mt/a Folding boxboard Other fresh fibre grades Recycled grades

• Avg. growth rate for

premium cartonboards is 3–4%/a

1-9/2016 26

Global food service board market is 3.5 Mt/a*

Source: Metsä Board estimates *) Base board only, excl. other laminate materials such as aluminium and PE.

Cups Plates Cartons

• Avg. growth rate for food

service board is 3–5%/a APAC

1.0 Mt/a

EMEA

0.9 Mt/a

Americas

1.6 Mt/a

500 600 700 800 900 1000 1100 2009 2010 2011 2012 2013 2014 2015 2016

Taivekartonki Valkopint ainen kraft laineri

Market price development in folding boxboard and white-top kraftliner in Europe

Sources: Pöyry Management Consulting ja FOEX Indexes Ltd

EUR/ tn

Folding boxboard White-top kraftliner

27 1-9/2016

Pulp price development (PIX)

350 400 450 500 550 600 650 700 750 800 850 900 950 1000 1050

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

350 400 450 500 550 600 650 700 750 800 850 900 950 1000 1050

Source: Foex Indexes Ltd

Softwood, USD

Softwood, EUR Hardwood, EUR

Hardwood, USD

USD EUR

28 1-9/2016

Metsä Board has a strong position in Europe

Largest Folding Boxboard Producers in Europe

Total capacity: 3.7M tons

1-9/2016 29

Largest White Fresh Fibre Linerboard Producers in Europe

Total capacity: 2.2M tons

Sources: Company information, Pöyry Management Consulting Oy 16% 7% 9% 11% 21% 36% 300 600 900 1200 1500 Others International Paper Mayr-Melnhof Kotkamills Stora Enso Metsä Board 15% 7% 10% 13% 22% 32% 200 400 600 800 Others SCA BillerudKorsnäs Mondi Smurfit Kappa Metsä Board Production capacities in tons Production capacities in tons

• Target is to grow steadily above the market growth

level

• The biggest growth drivers are

– strong and long-term customer relationships – innovative high-performance product portfolio to replace

• ther packaging materials

– best-in class customer service concept

• In Europe, Metsä Board’s paperboard sales volume

grew 12% in 2015 compared to 2014

1-9/2016 30

Metsä Board is the market leader in folding boxboard and white fresh fibre linerboard in Europe

Metsä Board uses only fresh fibres from sustainably managed northern forests

• Americas is Metsä Board’s main growth market
• The biggest growth drivers are

– Limited local supply in high-quality paperboards – 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 sales volume

grew 16% in 2015 compared to 2014

1-9/2016 31

Metsä Board has a significant foothold in North America

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

• Metsä Board is the paperboard quality benchmark in

Asia

• Responsible consumer goods companies promote

good packaging

– Sustainability – Traceable raw materials – Product safety

• Due to the local overcapacity in Asia, the timing is not

good for aggressive growth

1-9/2016 32

Focus on the high-quality segment in APAC

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

Q3/2016 results and outlook

1-9/2016 34

Performance in Q3/2016

• Healthy market situation in fresh fibre

paperboards

• Growing delivery and production volumes
• Fine paper production ended in July and

wallpaper base production in September

• Solid performance in Finnish mills, Husum

impacted profitability negatively

• Cash flow from operations was clearly

positive

1-9/2016 35

Key financials

Q3/16 Q2/16

Change Q3/16

• vs. Q2/16

1-9/16 1-9/15

Change 1-9/16

• vs. 1-9/15

Sales

€ million

440 423 4% 1,299 1,545

• 16%

EBITDA, comparable

€ million

59 61

• 3%

178 224

• 20%

% of sales

%

13,5 14,4 13,7 14,5 Operating result, comparable

€ million

34 36

• 6%

105 145

• 28%

% of sales

%

7,7 8,5 8,1 9,4 Result before taxes, comparable

€ million

27 27 84 120

• 30%

Earnings per share

€

0.07 0.07 0,21 0,27

• 22%

ROCE, comparable

%

8.0 8.5 8,3 12,1 Gross investments

€ million

16 48

• 67%

119 117 2% Cash flow from operations

€ million

67

• 22

23 181

• 87%

Paperboard deliveries grew due to the healthy demand

CAGR% in deliveries in 2011–2015 has been 9% / year

197 210 203 204 213 224 224 227 250 266 110 120 111 130 141 137 131 142 148 148 60 120 180 240 300 360 420 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Folding boxboard Fresh fibre linerboard

1,000 tonnes

Note! Figures do not include wallpaper deliveries

Change in paperboard deliveries:

+4%

Q3/16 vs.Q2/16

+15% Q3/16 vs.Q3/15

36 1-9/2016

Sales increased, EBIT still impacted by Husum

Sales,

EUR million

1-9/2016 37

Comparable EBIT,

EUR million

514 499 526 522 498 462 436 423 440 100 200 300 400 500 600 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 35 37 43 47 55 35 35 36 34 10 20 30 40 50 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16

____________ Q1-Q3/2015: 1,545 M€ ____________ Q1-Q3/2016: 1,299 M€ ____________ Q1-Q3/2015: 145 M€ ____________ Q1-Q3/2016: 105 M€

Profitability development

Comparable ROCE, % Comparable operating profit of sales, %

6,4 9,1 11,3 13,0 8,3 8,5 8,0 2 4 6 8 10 12 14 2013 2014 2015 Q3/15 Q1/16 Q2/16 Q3/16 5,2 6,8 9,0 11,0 8,0 8,5 7,7 2 4 6 8 10 12 2013 2014 2015 Q3/15 Q1/16 Q2/16 Q3/16 Target over 12% from 2017

38 1-9/2016

Decrease in working capital and smaller investments turned the cash flows clearly positive

51 74 33 56 93 66

• 22
• 22

67 46 56 9 8 45 8

• 76
• 50

49 157 198 250 214 256 247 193 115 89 110 155 188 119 118 70

• 15
• 73
• 69
• 100
• 50

50 100 150 200 250 300 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Cash flow from operations, quarterly Free cash flow, quarterly Cash flow from operations, rolling 12 months Free cash flow, rolling 12 months

EUR million

39 1-9/2016

• Positive market situation in fresh fibre paperboard

– Stable or increasing market prices

• Metsä Board’s paperboard delivery volumes expected

to remain stable

• Healthy price level in the order intake of Husum’s new

FBB, but long lead time postpones the profit impact

• Extended annual maintenance shutdown in Husum in

Q4 increases costs

• Revised estimate for total investments in 2016 is

€165 million

Near-term outlook

40 1-9/2016

Metsä Board’s comparable

• perating result in the fourth

quarter of 2016 is expected to remain roughly on the same level as in the third quarter of 2016.

Profit guidance for Q4/2016

41 1-9/2016

Balance sheet and funding

1-9/2016 43

Strong balance sheet

Equity ratio, %

33% 41% 39% 47% 48%

0% 10% 20% 30% 40% 50% 2012 2013 2014 2015 9/16

73% 70% 51% 32% 49%

0% 10% 20% 30% 40% 50% 60% 70% 80% 2012 2013 2014 2015 9/16

Net gearing, %

625 597 427 333 488

3,4 2,9 1,8 1,2 2,1

1 2 3 4 200 400 600 2012 2013 2014 2015 9/16 Net debt, EUR million Net debt/EBITDA (rolling 12m)

Net debt, EUR million and Net debt/EBITDA

Debt structure and liquidity

30 September 2016 222 199 144 20 108

Bonds Loans from financial institutions Pension loans Finance leases and

• ther loans

Other short-term loans

202 100 65

Cash and cash equivalents Revolving credit facility Unraised pension loans

Debt structure, total EUR 693 million Available liquidity, total EUR 367 million

Average maturity of long-term loans at 30 September in 2016 was 2.4 years.

44 1-9/2016

1-9/2016 45

Debt programmes 30 September 2016

Long-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 2.9 2020 EUR 101 million bilateral loans 101 101 1.7 2016–2020 EUR 20 million finance leases 20 20 1.9 2016–2022 EUR 209 million pension loans 209 144 4.5 2016–2020 Long-term borrowings Total amount, EUR million Outstanding, EUR million Average interest rate*, % Maturity Revolving credit facility 2014 100

• 2020

Pension loan facilities 209 144 4.5

• Short-term funding programmes

Metsä Group internal short-term limit 150

• 0–12 months

Metsä Group Treasury funding programmes EUR 150 million domestic CP programme 150

• 0–12 months

Metsä Board’s significant debt securities issued and outstanding at 30 September 2016

* 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 30 September 2016 is 3.3 %

Metsä Board’s principal long-term liquidity reserves at 30 September 2016

1-9/2016 46

Maturity schedule in long-term IB debt

17 155 34 256 173 100 65 50 100 150 200 250 300 2016 2017 2018 2019 2020 2021 >2021

Long-term interest bearing debt (total EUR 488 million) and committed undrawn credit facilities 30 September 2016

Long-term interest bearing liabilities Committed undrawn credit facilities

EUR million

1-9/2016 47

Steadily decreasing net financial costs

47 56 39 32 21

5,2 4,6 4,2 3,8 3,3

3,0 3,5 4,0 4,5 5,0 5,5 20 40 60 2012 2013 2014 2015 Q1-3/16

Net financial costs, EUR million Average interest rate at the end of period, % EUR million %

• Net financials in Q3 were -7 M€

(Q2/16: EUR -9 M€)

• Net exchange gains and losses

amounted to -1 M€ (-2M€)

• Total FX impact in Q3 2016 vs. Q2 2016 was slightly positive
• Hedging duration of the main foreign currency flows is currently 5-6 months

48

FX exposure and sensitivities

58 % 32 % 6 %4 %

USD SEK GBP Other currencies

FX exposure by currency Annual gross amount EUR 1.1 billion Annual FX sensitivities to Group EBIT 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 +60 million GBP, £ EUR +5 million Swedish krona EUR -30 million

1-9/2016

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1/2016

49

Metsä Board 's credit rating

Moody’s Standard & Poor’s

BB+ | Ba1

Stable Positive

BB | Ba2 BB- | Ba3 B+ | B1 B | B2 B- | B3 CCC+ | Caa1 CCC | Caa2

1-9/2016

Investments

• Estimated total capex in 2016 was revised

from €135 to €165 million due to a cost

• verrun in Husum investment programme

and changes in capex allocations between years of the extrusion coating line

• In Jan–Sep 2016 total capex was €119

million

• Main growth capexes in 2016 include

Husum investment programme, extrusion coating line and equity investment in Metsä Fibre’s bioproduct mill

Estimated total capex in 2016 has been revised to €165 million

30 60 90 120 150 180 2010 2011 2012 2013 2014 2015 2016E Capex Growth capex Depreciation € million

51 1-9/2016

1-9/2016 52

Husum investment programme

Folding boxboard production

• Capacity approximately 400,000 t/a
• Deliveries mainly to Americas and

Food service globally

Linerboard production

• Capacity approximately 300,000 t/a
• Deliveries to Europe and Americas

Capacity changes 2014 vs. 2016:

• Paperboard capacity +700,000 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), start-up on February 2016
• Enhancements to the pulp mill and the mill site’s own port

• Delays in customer approvals in Q3 due to the

– Bottlenecks in the finishing area (Q2/2016) – Leak in the pulp mill’s recovery boiler (Jun-Jul/2016)

• Efficiency improvement programme is progressing as

planned

• Investment programme targets

– Full capacity of FBB machine is reached by end of 2016 – Annual EBIT improvement of €50 million from 2018 onwards

• Healthy price level in order intake, but long lead time will

postpone positive profit impact

1-9/2016 53

Update on the ramp-up phase of folding boxboard machine in Husum after Q3 2016

200 400 600 800 1000 1200 1400

Production (packed net) 7 days rolling average Monthly/Quarterly average

Steadily increasing production volumes

Q1/2016 Q2/2016 Q3/2016

July August September

Daily production volumes in Husum’s new FBB machine, tonnes

tonnes

54 1-9/2016

1-9/2016 55

Ambitious growth targets for new paperboard volume from Husum mill

250 150 150 500 1 000 1 500 2 000 Deliveries in 2015 Folding boxboard to Americas Food service board globally Linerboard to Europe and Americas Targeted deliveries in 2018 A total of 400,000 tonnes

• f new FBB capacity

1,000 tonnes Incremental capacity in linerboard*)

*) until July 2016 the paperboard machine (BM2) produced simoultenously fine paper reels.

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

– Investment cost of approximately EUR 1.2 billion – Start up in Q3 2017

• Capital invested by Metsä Board will be EUR 24,9 million

– Metsä Board has no other financial commitments in the project

• Metsä Board’s holding in Metsä Fibre remains unchanged at

24.9 per cent

• All in all, Metsä Board’s pulp balance is expected to be

500,000–600,000 t/a long from 2018 onwards

– Majority of the market pulp is softwood chemical pulp – Reserve to grow paperboard business further in the future while maintaining self-sufficiency in pulp

1-9/2016 56

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

Food service packaging requires barrier features e.g. moisture and fat resistance

• Investment value EUR 38 million
• Will be implemented at Husum mill
• Start-up in H1/2017 with capacity of 100,000 t/a
• In 2015–2016 Metsä Board’s paperboards are coated by

external converter

• The company continues to develop other barrier solutions

1-9/2016 57

Metsä Board expands its offering in food and food service paperboards by investing in extrusion coating

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)

1-9/2016 59

Production locations

Äänekoski Simpele Joutseno Tako Kyro Kaskinen Husum Kemi

1-9/2016 60

Paperboard capacity

Town Country Machines Folding boxboard White fresh fibre linerboard Wallpaper Base* Total Tampere (Tako) Finland 2 210 210 Kyröskoski (Kyro) Finland 2 190 100 290 Äänekoski Finland 1 240 240 Simpele Finland 1 280 280 Kemi Finland 1 410 410 Husum Sweden 2 400 300 700 Total 9 1,320 710 100 2,130

*) Production ended in September 2016

1-9/2016 61

Pulp capacity

Metsä Board pulp mills Country Chemical pulp BCTMP Total

Husum Sweden 750 750 Joutseno Finland 320 320 Kaskinen Finland 320 320 Total 750 640 1,390

Metsä Fibre pulp mills Country Chemical pulp BCTMP Total

Äänekoski Finland 530 530 Kemi Finland 590 590 Rauma Finland 650 650 Joutseno Finland 690 690 Total 2,460 2,460

Deliveries by region in 2015

Folding Boxboard

1-9/2016 62

Fresh fibre linerboard

50% 26% 14% 11%

Western Europe Eastern Europe Americas Asia and Pacific

61% 6% 32% 1%

• The amount of certified wood was

75%

• A new supply chain management

target was launched: to audit 100% of risk rated key material suppliers against sustainability criteria by end 2015 89% of all Metsä Board purchases, excluding wood, come from countries where we have own production

Raw materials and supply chain management 2015

1-9/2016 63

Metsä Board purchases by country, %

(excl. wood supply)

68 17 7 4 3 1 Finland Sweden Other EU Germany Outside Europe Other

Own generation 20,90% Through PVO shareholding 29,60% Purchased energy 49,50% Wood- based 58% Nuclear power 22% Natural gas 8% Hydro 5% Coal 4% Oil 2% Other 1% Sweden 39% Finland 25% Baltic countries 20% Russia 15%

Sourcing 2015

Electricity sourcing (total 2,533 GWh)

1-9/2016 64

Primary energy used (total 12.3 TWh) Wood sourcing by country (total 5.0 million cubic metres)

1-9/2016 65

Cost structure in 2015

Delivery costs 16% Wood 26% Chemicals, pigments and fillers 14% Energy 10% Other variables 4% Personnel 14% Other fixed 16%

Fixed costs Variable costs

Sustainability

SUPPLY CHAIN

RISK-RATED KEY MATERIAL SUPPLIERS AUDITED

100% SAFETY

LOST-TIME ACCIDENTS ANNUALLY PERFORMANCE 2015

11,1

ENERGY

ENERGY EFFICIENCY IMPROVEMENT10 PERFORMANCE 2015

10%

12% *)

• 17%

RESOURCE EFFICIENCY

PROCESS WATER USE PER PRODUCT TONNE PERFORMANCE 2015

• 16%

*) Target has been brought up from 10% to 12%

1-9/2016 67

Metsä Board’s sustainability targets (2020 vs. 2009)

> 80% WOOD

THE AMOUNT OF CERTIFIED WOOD PERFORMANCE 2015

75%

• 30%

CLIMATE

FOSSIL CO2 EMISSIONS PER PRODUCT TONNE PERFORMANCE 2015 -42%

<3% WELL-BEING

SICKNESS ABSENTEEISM PERFORMANCE 2015

4,1% BIOENERGY SHARE OF TOTAL PURCHASED ENERGY 81%

1-9/2016 68

Many advantages of lightweight and safe cartonboard

Fresh forest fibre is a pure and safe raw material. Lightweight boards use less raw material, water and energy and lower transported weights. Consistent quality enables trouble-free runnability in converting and packing lines. Strong packaging stays in shape in logistics. High quality packaging attracts at the point-of-sale. Lightweight boards generate less

• waste. They are recyclable and

compostable. Ensured consumer safety.

69

Metsä Board is a world leader for corporate action on climate change

• Metsä Board was awarded a position on

the Climate A List by CDP

• Only 9% of corporations participating to be

awarded on the list

• In 2015 a position on the Water A List and a

leadership status in Forest programme

• Investments in bioenergy, as well as energy and

material efficiency

• Fossil CO2 emissions have decreased by 42%

since 2009

• More than 80% of the fuels used are bio-based.

1-9/2016

Owners

Market cap and foreign owners

30 September 2016

Ownership distribution

30 September 2016

Market cap and ownership distribution

4 8 12 16 20 24 500 1 000 1 500 2 000 2 500

2012 2013 2014 2015 9/2016

Market cap, EUR million Share of foreign owners, %

42 % 25 % 18 % 15 %

Metsäliitto Cooperative Domestic institutional investors Domestic private investors Foreign owners

EUR million *) Metsäliitto Cooperative has 62% of the voting rights

*) 71

%

1-9/2016

1-9/2016 72

Ownership structure on 30 September 2016

42 % 15 % 18 % 12 % 7 % 3 % 3 %

Metsäliitto Cooperative Foreign owners* Households Public sector

• rganisations

Finance and insurance companies Non-profit

• rganisations

Other companies

62 % 15 % 11 % 5 % 4 % 2 % 1 %

Metsäliitto Cooperative Public sector

• rganisations

Households Foreign owners* Non-profit

• rganisations

Finance and insurance 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

Appendix

METSÄ BOARD

Paperboard

Sales:

EUR 2.0 billion

Personnel:

2,600

• METSÄLIITTO COOPERATIVE’S

OWNERSHIP 42,53% (HOLDING OF VOTES 62,15%)

METSÄ WOOD

Wood products

Sales:

EUR 0.9 billion

Personnel:

2,000

METSÄLIITTO COOPERATIVE’S OWNERSHIP 100%

METSÄ FOREST

Wood supply and forest services

Sales:

EUR 1.5 billion

Personnel:

900

METSÄLIITTO COOPERATIVE’S OWNERSHIP 100%

METSÄ TISSUE

Tissue and cooking papers

Sales:

EUR 1.0 billion

Personnel:

2,800

METSÄLIITTO COOPERATIVE’S OWNERSHIP 91%

METSÄ GROUP | Sales

EUR5.0 billion | Personnel 9,600

METSÄLIITTO COOPERATIVE | Group’s parent company

| Owned by 116,000 Finnish forest owners

METSÄ FIBRE

Pulp

Sales:

EUR 1.4 billion

Personnel:

850

METSÄLIITTO COOPERATIVE’S OWNERSHIP 50,2% METSÄ BOARD 24,9% ITOCHU CORP. 24,9%

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Metsä Board is part of Metsä Group & listed in Nasdaq Helsinki

2005 Structural change starts

Paper businesses over 80% of sales Decision to exit paper business

2006 Strategic review launched

Restructuring and focused investment programme initiated, focus on paperboard

2007–2013 Streamlining and focused investments

Paper capacity reduction from about 5 million to 0.8 million annual tonnes Major divestments incl. Graphic Papers and Map Merchants Paperboard capacity increases

2013 Strategic review completed

Clear focus on paperboard Paper production about a quarter of sales

2015 Strong position and growing

Europe’s leading producer of folding boxboard The world’s leading manufacturer of coated white-top kraftliners

2016 Final exits from non-core businesses

Fine paper production ended at Husum mill and wallpaper base production at Kyro mill Paperboard capacity 2 million t/a

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True success story

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5241 5624 4440 3236 2432 2605 2485 2108 2019 2008 2008 0,1 0,8 1,1

• 1,1
• 6,2

6,6 2,4 3,6 5,2 6,8 9,0

• 10,0
• 8,0
• 6,0
• 4,0
• 2,0

0,0 2,0 4,0 6,0 8,0 10,0

• 6000
• 4000
• 2000

2000 4000 6000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sales, million EUR EBIT-%

%

Sales and EBIT-% development

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M&A activity 1997-2015

100 000 B2 shares in PVO

Acquisitions Divestments

Biberist Paper Mill UK Paper Modo Paper Zanders Chemicals Business Botnia Wood Corrugated Packaging MD Papier Metsä Tissue Albbruck Savon Sellu Forestia Kemiart Liners (53 %) 8% in Botnia PSM 9% in Botnia Carton plants Map New Thames MB Uruguay Graphic Papers Part of Reflex Hallein mill 1997 2000 1998 1999 2001 2002 2003 2004 2005 2006 2007 2009 2008 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 1-9/2016 78

Significant Divestments EUR 3.7 billion in assets divested since 2001

* Cash portion **Incl. pension liabilities

Katri Sundström

Vice President, Investor relations Tel +358 400 976 333 katri.sundstrom@metsagroup.com www.metsaboard.com

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Contact information