Metsä Board’s comparable operating result in January–June 2022 was EUR 267 million

Metsä Board Corporation Half-year financial report 2022 28 July 2022 at 12:00 noon EEST

JANUARY–JUNE 2022 (compared to 1–6/2021)

• Sales were EUR 1,232.5 million (1,049.5).

• The comparable operating result was EUR 267.4 million (191.3), or 21.7% (18.2) of sales. Operating result was EUR 283.3 million (185.6).

• Comparable earnings per share were EUR 0.57 (0.42), and earnings per share were EUR 0.61 (0.41).

• Comparable return on capital employed was 23.0% (19.3).

• Net cash flow from operations was EUR 95.3 million
  (150.7).

EVENTS IN APRIL–JUNE 2022

• Russia’s war in Ukraine did not have a significant impact on Metsä Board’s profitability in the second quarter or on the company’s financial position at the end of June.

• The demand for fresh fibre paperboards remained strong, and the average prices of Metsä Board’s paperboards in euros increased from the first quarter.

• Total deliveries of paperboards were 472,000 tonnes (Q2 2021: 514,000). Inventory levels were increased as planned in the second quarter. In addition, the delivery volumes in the comparison period exceeded the production capacity.  

• Production volumes remained high in paperboard as well as in pulp and BCTMP. Several annual maintenance shutdowns took place in the second quarter, mainly at mills in Finland.

• Cost inflation continued to be rapid. The rise in costs was faster than expected, especially in chemicals and energy. In addition, logistics costs increased clearly from the previous quarter.

• The expected start-up of the recovery boiler and turbine in Husum has been postponed from September to November due to delays in installation work.

• In May, Metsä Board announced it was going to explore possibilities to increase its folding boxboard capacity in Finland or Sweden. The evaluation of options is expected to be completed by the end of 2022.

Metsä Board was again awarded the Platinum level rating by EcoVadis for its sustainability and corporate social responsibility. The company is in the top 1% of producers of paper, paperboard and packaging.
  
IMPACTS OF Russia’s WAR IN Ukraine

Russia’s attack on Ukraine has an impact on Metsä Board’s business operations. In 2021, Russia accounted for 5.6%, and Ukraine for 0.7%, of Metsä Board’s sales. Russian sales have mainly consisted of folding boxboard sales to multinational brand owners. In 2021, folding boxboard deliveries to Russia were approximately 130,000 tonnes. In March 2022, Metsä Board discontinued its sales to Russia. The strong demand for paperboard in the company’s main markets  Europe and North America has supported the reallocation of the folding boxboard sales previously directed to Russia.

Metsä Group, responsible for Metsä Board’s wood procurement, discontinued its wood procurement from Russia in March and focused it on existing sourcing areas in Finland, Sweden and the Baltic countries. In 2021, Russian wood accounted for approximately 9% of Metsä Board’s wood supply. Most of the wood imports from Russia have been birch. In the second quarter, the market situation for birch pulpwood grew tighter in all of Metsä Group’s operating areas, but wood deliveries ran normally. 

In May, Russia halted natural gas supplies to Finland. Prior to this, Metsä Board’s Joutseno BCTMP mill and the Tako and Kyro paperboard mills used natural gas imported from Russia in their production. Despite the halt to deliveries from Russia, the mills have been supplied with natural gas as planned. Natural gas can also be partly replaced by oil and the company is also preparing to use liquefied natural gas. Constraints in the availability of alternative forms of energy could affect the continuity of Metsä Board’s production. In the long term, by the end of 2030 at the latest, Metsä Board’s target is that all the energy it uses will be fossil free.
  
IMPACTS OF THE CORONAVIRUS PANDEMIC

The coronavirus pandemic shifted consumption from services to goods and increased the consumption of products used at home. This increased the demand for packaging materials, especially in food and other daily consumer goods – the main end uses for Metsä Board’s paperboards. The pandemic also accelerated sales in e-commerce, which increased the demand for white kraftliners. The demand for Metsä Board’s fresh fibre paperboards has been at a record high in all end uses throughout the pandemic.

Metsä Board’s production and deliveries have run smoothly during the pandemic.

Most of the strict precautionary measures adopted at Metsä Board’s production and office facilities during the coronavirus pandemic have been removed, depending on the country of operations. The company continues its efforts to ensure the health of employees, prevent the spread of the virus and secure business continuity. The situation is monitored continuously, and local precautionary measures can be quickly initiated if required. A prolonged pandemic could lead to disruptions in production and/or the supply chain.

Metsä Board’s financial position is very good. The maturity structure of the loans is healthy, and the company has adequate liquidity. Metsä Board’s paperboard product portfolio has responded to the changes in demand resulting from the pandemic, and the cash flow, which has remained strong, supports financial flexibility.
 

RESULT GUIDANCE FOR JULY–SEPTEMBER 2022

Metsä Board’s comparable operating result in July–September 2022 is expected to be roughly at the same level as in April–June 2022.

NEAR-TERM OUTLOOK

Demand for fresh fibre paperboards is expected to remain good in the company’s main market areas in Europe and North America. Demand will continue to be supported by long-term megatrends such as the use of renewable packaging materials to replace plastic. The slowdown in global economic growth and decrease in consumer’s purchasing power create uncertainty in the operating environment.

Metsä Board’s paperboard delivery volumes in July–September are expected to remain roughly at the same level as in April–June (472,000 tonnes). The average prices of folding boxboard and white kraftliners are expected to continue to increase.

Demand for long-fibre market pulp is expected to remain good in Europe and China. The global supply of market pulp will continue to be restricted by bottlenecks in logistics as well as planned and unplanned production shutdowns. A stronger than expected slowdown in global economic growth and the impacts of the Covid-19 situation in China are creating uncertainty about the development of the market situation.

The planned annual maintenance shutdowns are expected to have a similar impact on results in July–September 2022 to those in April–June 2022.

Cost inflation is expected to continue, especially in chemicals and energy. Logistics costs will remain high due to limited availability of transport equipment and high fuel prices. The increases in the wood price in the early part of the year together with higher harvesting and transport costs are expected to increase total wood costs in the second half the year compared to the first half.

In July–September 2022, exchange rate fluctuations, including the impact of hedges, will have a positive impact on the result compared to April–June 2022 and a clearly positive impact compared to July–September 2021.

METSÄ BOARD’S CEO MIKA JOUKIO:

“Metsä Board’s second quarter was again a record quarter in many ways. Our sales amounted to EUR 650 million, and our comparable operating result to EUR 146 million. The comparable return on capital employed was as high as 25%. Despite several annual maintenance shutdowns in the second quarter, the paperboard production volumes actually increased from the first quarter. In the first half of the year, the total production volumes of paperboards, pulp and BCTMP were at a record high.

Our comparable operating result in January –June was EUR 267 million, or nearly 22% of sales. Our profitability improved due to significantly higher sales prices of folding boxboard and white kraftliners in all our market areas. The stronger dollar against the euro has had a positive effect on results, especially on the paperboard business in the Americas and in the market pulp business overall.

Thanks to the strong market situation, the end of sales in Russia did not have a negative impact on our paperboard sales. On the contrary, we used the volumes released to support our key customers’ growth projects and thus improved customer satisfaction. The supply of wood and natural gas to our mills has also been normal, despite the end of supplies from Russia.

Cost inflation has remained strong especially in chemicals, energy and logistics. We expect costs to remain high in the near future. Concerning energy, our dependence on market electricity will decrease when the new recovery boiler and turbine start up in Husum later this year.

The negative impacts of high inflation on consumer purchasing power and thus on demand for consumer products are unavoidable. However, the focus of our recent discussions with customers has already turned to 2023 and to securing the availability of paperboard. Megatrends continue to support growth in paperboard packaging. Last year, strong demand for paperboards slowed down the substitution of plastics with renewable materials, but this year the substitution projects have been reactivated.  

In line with our strategy, we aim to grow in fibre-based packaging materials and renew our industrial operations. In addition to our ongoing investment projects, we will explore new opportunities to increase our folding boxboard production in Finland or Sweden. The evaluation of options is expected to be completed by the end of 2022. We believe that the demand for sustainably produced packaging materials, that promote the circular economy, will continue to exceed supply in our main markets in the coming years.”

KEY FIGURES

METSÄ BOARD CORPORATION

Further information:

Henri Sederholm, CFO, tel. +358 10 465 4913
Katri Sundström, VP, Investor Relations, tel. +358 10 462 0101

A conference call for investors and analysts will begin on 28 July at 3 p.m. Conference call participants are requested to dial in and register a few minutes earlier on the following numbers:

Finland: +358 9 81710310

Sweden: +46 856642651

United Kingdom: +44 3333000804    

United States: +1 6319131422

The conference call ID is 69268582#.

The presentation material will be available before the start of the conference call at www.metsagroup.com/metsaboard/investors/ and https://metsaboard.videosync.fi/2022-q2.

Events in 2022:

27 October 2022: Interim Report 1–9/2022

10 November 2022: Capital Markets Day

Metsä Board
www.metsagroup.com/metsaboard/

Metsä Board is a leading European producer of premium fresh fibre paperboards. We focus on lightweight and high-quality folding boxboards, food service boards and white kraftliners. The pure fresh fibres we use in our products are a renewable and recyclable resource, that can be traced back to sustainably managed northern forests. We are a forerunner in sustainability, and we aim to have completely fossil free mills and raw materials by the end of 2030.

Together with our customers we develop innovative packaging solutions to create better consumer experiences with less environmental impact. In 2021 our sales totalled EUR 2.1 billion, and we have around 2,400 employees. Metsä Board, part of Metsä Group, is listed on the Nasdaq Helsinki.

Follow Metsä Board: Twitter LinkedIn YouTube Instagram