Metsä Board’s comparable operating result in January–June 2020 was EUR 94 million
Metsä Board Corporation Half-Year Financial Report 1 January–30 June 2020 30 July 2020 at 12:00 noon EEST
January–June 2020
(compared to 1–6/2019)
• Sales were EUR 945.2 million (964.2).
• Comparable operating result was EUR 94.2 million (102.8), or 10.0% (10.7%) of sales. Operating result was EUR 100.3 million (118.3).
• Comparable earnings per share were EUR 0.19 (0.23), and earnings per share were EUR 0.21 (0.27).
• Comparable return on capital employed was 10.7% (11.7%).
• Net cash flow from operations was EUR 152.3 million (67.1).
April–June 2020
(compared to 4–6/2019)
• Sales were EUR 473.1 million (477.1).
• Comparable operating result was EUR 60.5 million (41.0), or 12.8% (8.6%) of sales. Operating result was EUR 66.5 million (46.4).
• Comparable earnings per share were EUR 0.13 (0.09), and earnings per share were EUR 0.15 (0.10).
• Comparable return on capital employed was 13.9% (9.7%).
• Net cash flow from operations was EUR 72.3 million (30.7).
Impact of the coronavirus on Metsä Board’s business operations
The coronavirus pandemic has increased demand for hygienic and safe packaging materials, particularly for end uses in the food, beverage and pharmaceutical industries. On the other hand, the pandemic has weakened demand in graphic end uses and packaging for luxury items. Metsä Board’s paperboard order inflows grew rapidly with the outbreak of the pandemic in March–April, but returned to their normal level towards the end of the review period. Metsä Board’s paperboard deliveries in the first half of the year increased year-on-year.
The coronavirus has not had an impact on production at Metsä Board’s mills. To minimise close contacts, the scope of the annual maintenance of mills scheduled for the second quarter of the year was scaled down and shutdowns were partly rescheduled to the second half of the year.
Metsä Board’s financial position is good. The maturity profile of the loans is healthy, and the company has adequate liquidity. The company’s paperboard portfolio is defensive in crisis situations, and thus the cash flow, which has remained strong, supports financial headroom. The pre-engineering phase of the renewal of the Husum pulp mill and the preparatory construction work related to the investment progressed as planned during the first half of the year. The company has at its disposal substantial precautionary measures aiming to ensure health and safety of the personnel and the continuity of the business operations. Despite the precautionary measures, a prolonged pandemic could lead to disruptions in production and/or the supply chain. Furthermore, the weakening of the world economy attributable to the pandemic is also likely to reduce demand for Metsä Board’s products and thereby have a negative impact on the company’s profitability.
Events in April–June 2020
• Demand for Metsä Board’s fresh fibre paperboards and market pulp was at a good level, and price levels remained fairly stable.
• Paperboard production volume was at a record high, totalling 489,000 tonnes.
• Net cash flow from operations remained strong at EUR 72.3 million.
• The Excellence Centre for paperboard and packaging design was completed on schedule in Äänekoski.
• The processing of the environmental permit for the new recovery boiler at the Husum pulp mill has progressed slightly slower than expected. Metsä Board expects the new recovery boiler to start up during the first half of 2022 at the earliest; the previous estimate was during the fourth quarter of 2021 at the earliest.
• The 2020 Annual General Meeting was held on 11 June 2020 in accordance with exceptional procedures. The Annual General Meeting decided to distribute a dividend of EUR 0.10 per share and a capital repayment of EUR 0.14 per share, totalling EUR 0.24 per share. The dividend payment and capital repayment date was 24 June 2020.
Near-term outlook
The duration of the coronavirus pandemic and the scope of its negative impact on the world economy and on Metsä Board’s business operations continue to be difficult to estimate.
Metsä Board’s paperboard deliveries in the third quarter are expected to decrease slightly compared to the second quarter of 2020.
The market prices of folding boxboard and white kraftliner in local currencies are expected to remain stable.
Annual maintenance shutdowns at integrated mills in the third quarter are scheduled for Kemi in September and Husum in September–October. In addition, some minor maintenance work has been moved from the second quarter to the third.
In the second half of the year, production curtailments announced by some pulp producers, as well as maintenance shutdowns, will decrease the supply of long-fibre market pulp. Metsä Board’s market pulp deliveries in the third quarter are expected to decrease compared to the second quarter.
Changes in exchange rates, including the impact of hedges, will have a neutral impact on the result in July–September 2020 compared to the second quarter of 2020 and a positive impact compared to the third quarter of 2019.
The production costs of paperboard and pulp are not expected to decrease significantly from the second quarter.
Result guidance for July–September 2020
Metsä Board’s comparable operating result for the third quarter of 2020 is expected to weaken compared to the second quarter of 2020.
Metsä Board’s CEO Mika Joukio:
“Metsä Board’s business operations performed well in the second quarter. At the beginning of the coronavirus pandemic in March–April, demand for fresh fibre paper-boards used in food and pharmaceutical packaging in particular was exceptionally strong, and our order backlog increased to a high level. This rapid growth is explained not only by the pandemic, but also by the Finnish paper industry strike in early 2020. However, de-mand normalised towards the end of the review period. Our paperboard delivery volumes in April–June were higher than in the first quarter and in the corresponding period last year.
Our comparable operating result in the second quarter improved year-on-year and was EUR 60.5 million (41.0). Profitability was supported by lower production costs, particularly in the paperboard business, and favourable foreign exchange development. The price development of our paperboards has remained relatively stable, but the sales prices of market pulp were clearly lower than in the previous year.
Our cash flow from operations has remained strong for three consecutive quarters. In the first half of 2020, our cash flow from operations was clearly higher than in previous years, at EUR 152.3 million. This further supports our good liquidity. Our profit distribution from 2019 was in line with the original proposal of the Board of Directors, and our strong financial position also enables us to proceed with our investments as planned.
I have also observed with great pleasure the excellent performance of our mills during the coronavirus pandemic. Our total paperboard production volume was a record high in April–June. We also succeeded in improving safety at work during the first half of the year. We are heading in the right direction, although our long-term safety target, zero accidents, is still quite far away.
We will continue our close cooperation with our customers in product development and packaging design. The Excellence Centre for paperboard and packaging design in Äänekoski was completed in June, and it will boost our joint development projects. By centralising expertise in various fields in a coordinated entity, we will be better able to meet our customers’ needs and respond to development challenges.”
Key figures
| 2020 | 2019 | 2020 | 2020 | 2019 | 2019 | |
| Q2 | Q2 | Q1 | Q1-Q2 | Q1-Q2 | Q1-Q4 | |
| Sales, EUR million | 473.1 | 477.1 | 472.1 | 945.2 | 964.2 | 1,931.8 |
| EBITDA, EUR million | 92.6 | 73.6 | 59.3 | 151.9 | 172.9 | 294.5 |
| comparable, EUR million | 86.6 | 68.1 | 59.3 | 145.9 | 157.5 | 279.0 |
| EBITDA, % of sales | 19.6 | 15.4 | 12.6 | 16.1 | 17.9 | 15.2 |
| comparable, % of sales | 18.3 | 14.3 | 12.6 | 15.4 | 16.3 | 14.4 |
| Operating result, EUR million | 66.5 | 46.4 | 33.8 | 100.3 | 118.3 | 180.8 |
| comparable, EUR million | 60.5 | 41.0 | 33.8 | 94.2 | 102.8 | 184.4 |
| Operating result, % of sales | 14.1 | 9.7 | 7.2 | 10.6 | 12.3 | 9.4 |
| comparable, % of sales | 12.8 | 8.6 | 7.2 | 10.0 | 10.7 | 9.5 |
| Result before taxes, EUR million | 63.9 | 41.9 | 28.9 | 92.7 | 109.8 | 165.6 |
| comparable, EUR million | 57.8 | 36.4 | 28.9 | 86.7 | 94.3 | 169.2 |
| Result for the period, EUR million | 51.7 | 36.3 | 22.1 | 73.8 | 95.9 | 144.6 |
| comparable, EUR million | 46.9 | 31.9 | 22.1 | 69.0 | 82.2 | 145.8 |
| Earnings per share, EUR | 0.15 | 0.10 | 0.06 | 0.21 | 0.27 | 0.41 |
| comparable, EUR | 0.13 | 0.09 | 0.06 | 0.19 | 0.23 | 0.41 |
| Return on equity, % | 16.0 | 11.4 | 6.7 | 11.3 | 14.7 | 10.9 |
| comparable, % | 14.5 | 10.0 | 6.7 | 10.6 | 12.6 | 11.0 |
| Return on capital employed, % | 15.3 | 10.9 | 7.6 | 11.4 | 13.4 | 10.2 |
| comparable, % | 13.9 | 9.7 | 7.6 | 10.7 | 11.7 | 10.4 |
| Equity ratio end of the period, % | 58 | 57 | 59 | 58 | 57 | 59 |
| Net gearing end of the period, % | 24 | 30 | 20 | 24 | 30 | 23 |
| Interest-bearing net liabilities/comparable EBITDA | 1.1 | 1.2 | 1.0 | 1.1 | 1.2 | 1.1 |
| Shareholders’ equity per share end of the period, EUR | 3.57 | 3.60 | 3.71 | 3.57 | 3.60 | 3.76 |
| Interest-bearing net liabilities end of the period, EUR million | 305.5 | 380.2 | 260.1 | 305.5 | 380.2 | 307.8 |
| Total investments, EUR million | 43.3 | 17.9 | 29.8 | 73.1 | 24.3 | 98.9 |
| Net cash flow from operations, EUR million | 72.3 | 30.7 | 80.0 | 152.3 | 67.1 | 200.5 |
| Personnel end of the period | 2,662 | 2,591 | 2,376 | 2,662 | 2,591 | 2,351 |
METSÄ BOARD CORPORATION
Further information as of 13:00 p.m:
Jussi Noponen, CFO, tel. +358 10 465 4913
Katri Sundström, VP, Investor Relations, tel. +358 10 462 0101
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Metsä Board
Metsä Board is a leading European producer of premium fresh fibre paperboards and forerunner in sustainability. We produce premium lightweight folding boxboards, food service boards and white kraftliners for consumer goods packaging as well as retail-ready and food service applications. We work together with our customers on a global scale to innovate solutions for better consumer experiences with less environmental impact. The pure fresh fibres Metsä Board uses are a renewable resource, traceable to origin in sustainably managed northern forests. We aim for completely fossil free mills and raw materials by 2030.
The global sales network of Metsä Board supports customers worldwide, including brand owners, retailers, converters and merchants. In 2019, the company’s sales totalled EUR 1.9 billion, and it has approximately 2,400 employees. Metsä Board, part of Metsä Group, is listed on the Nasdaq Helsinki.