Metsä Group’s comparable operating result in January–March 2020 was EUR 62 million
Metsä Group Interim Report January–March 2020, 29 April 2020 at 12:00 noon EET
January–March 2020 (1–3/2019)
- Sales were EUR 1,253 million (1,438).
- Operating result was EUR 61 million (183). Comparable operating result was EUR 62 million (180).
- Result before taxes was EUR 46 million (167). Comparable result before taxes was EUR 48 million (163).
- Comparable return on capital employed was 4.9% (13.8).
- Cash flow from operations was EUR 49 million (41).
Events during the first quarter of 2020
- The average dollar-denominated market price of long-fibre pulp remained stable and that of short-fibre pulp decreased slightly compared to the previous quarter. The prices were nevertheless clearly lower than in the corresponding period last year.
- The strikes in Finland which concerned all of Metsä Group’s business areas had a negative impact on the operating result.
- Paperboard deliveries were on a higher level than in the corresponding period last year. The average price of white kraftliner in Europe was slightly lower than a year ago and the average price of folding boxboard was unchanged.
- The coronavirus pandemic increased demand for tissue papers, folding boxboard and white kraftliner.
- Metsä Fibre made the decision to build the most modern sawmill in the world in Rauma. The value of the investment is approximately EUR 200 million.
- The pre-engineering project of the Kemi bioproduct mill continues. The Lapland Centre for Economic Development, Transport and the Environment (ELY Centre) issued its reasoned conclusion on the EIA report, concluding the environmental impact assessment. The readiness to make an investment decision will be reached in the autumn of 2020, at earliest.
- Metsä Board received permission to begin the construction of Husum’s new recovery boiler. The final investment decision will be made when the environmental permit has been secured.
Events after the review period
In late April, Metsä Fibre agreed on the main equipment purchases for the new sawmill to be constructed in Rauma and for the planned Kemi bioproduct mill. The total value of the agreements is roughly EUR 500 million and their degree of Finnish content is 70%.
The coronavirus pandemic
Metsä Group follows and complies with the guidelines issued by authorities with regard to the coronavirus. The most important precautionary measure is physical distancing among the entire personnel. To prepare for the eventuality of any further spread of the epidemic, Metsä Group’s various functions have drawn up precautionary measures in advance, so that they will be able to ensure the personnel’s safety and business continuity. The Group’s resources have remained normal throughout the coronavirus pandemic. Production and deliveries have run normally, with the exception of Metsä Wood’s units in the UK as well as the Metsä Svir sawmill and wood supply operations in Russia, which have been operating at only partial capacity.
Result guidance for April–June 2020
Metsä Group’s comparable operating result is in Q2 2020 expected to improve from Q1 2020.
President and CEO Ilkka Hämälä:
“As anticipated, Metsä Group’s result in the first quarter of 2020 remained below that of the previous quarter. The lengthy strikes which concerned all of our business areas weakened our profit-making ability. The spread of the coronavirus disease COVID-19, which developed into a pandemic, did not have a negative impact on the demand for our products during the first quarter, with the exception of the sawn timber market, particularly in Europe, and Metsä Wood’s upgrading business in the UK.
The development of the pulp market in the beginning of the year has been modestly positive. The impact of the pandemic is visible in diverging ways in different customer segments, as the demand for pulp used in tissue papers has increased and as the consumption of pulp used in printing papers has decreased. Market pulp producers across the world have announced production curtailments attributable to either orders issued by authorities or other effects of the pandemic. Metsä Group’s pulp mills have operated at full capacity after the February strikes in Finland.
The pandemic has increased overall demand for the folding boxboard and kraftliner products. In terms of folding boxboard, the demand has focused particularly on food packaging.
Demand for tissue papers is strong, especially in consumer products and towels used for hand hygiene. We have responded to the increased demand by adjusting our product portfolio which has, in turn, allowed us to increase production volumes.
Metsä Group is proceeding with the development projects according to planned schedules, which the pandemic may naturally impact, should it draw out. During the quarter, we made a decision to invest in a next-generation sawmill in Rauma. The investment concerning the modernisation of the Husum pulp mill continues with the first-phase construction work. In the environmental impact assessment (EIA) process of the Kemi bioproduct mill, we received the reasoned conclusion. This will be used as a basis for the further development of the mill’s technical concept, and for updating the environmental permit application to correspond with the EIA statement.
In terms of its balance sheet, business structure and organisation, Metsä Group’s position is strong and we are ready to weather the serious crisis of the global economy initiated by the pandemic. In this situation, our priorities are the safety of our personnel and partners, preventing any further spread of the pandemic as part of society and ensuring our business continuity. Metsä Group converts Finnish wood into products that bring some EUR 4 billion worth of export earnings to Finland every year. The role that these export industry cash flows play in terms of the national economy is becoming increasingly important for the recovery following the exceptional situation.”
Key figures
| 2020 | 2019 | 2019 | |
| Condensed income statement, EUR million | 1–3 | 1–3 | 1–12 |
| Sales | 1 253.0 | 1 437.7 | 5 473.4 |
| Other operating income | 6.4 | 17.1 | 59.2 |
| Operating expenses | -1 118.0 | -1 198.6 | -4 742.9 |
| Depreciation and impairment losses | -80.4 | -73.2 | -415.5 |
| Operating result | 61.1 | 183.0 | 374.3 |
| Share of results from associated companies and joint ventures | 0.5 | -0.4 | 3.3 |
| Exchange gains and losses | -0.3 | -2.6 | -6.4 |
| Other net financial items | -15.1 | -13.4 | -55.4 |
| Result before income tax | 46.2 | 166.6 | 315.7 |
| Income tax | -11.1 | -33.9 | -76.8 |
| Result for the period | 35.1 | 132.7 | 238.9 |
| 2020 | 2019 | 2019 | |
| Profitability | 1–3 | 1–3 | 1–12 |
| Operating result, EUR million | 61.1 | 183.0 | 374.3 |
| Comparable operating result | 62.4 | 179.7 | 494.9 |
| % of sales | 5.0 | 12.5 | 9.0 |
| Return on capital employed, % | 4.8 | 14.1 | 7.3 |
| Comparable return on capital employed | 4.9 | 13.8 | 9.6 |
| Return on equity, % | 3.8 | 14.5 | 6.4 |
| Comparable return on equity | 3.9 | 14.1 | 9.7 |
|
2020 |
2019 | 2019 | |
| Financial position | 31.3. | 31.3. | 31.12. |
| Equity ratio, % | 56.2 | 53.3 | 56.2 |
| Net gearing ratio, % | 12 | 18 | 10 |
| Interest-bearing net liabilities, EUR million | 449 | 646 | 374 |
Segments
|
Sales and Operating result1–3/2020, EUR million |
Wood Supply and Forest Services | Wood Products Industry | Pulp andSawn Timber Industry | Paperboard Industry | Tissue and Greaseproof Papers |
| Sales | 430.6 | 87.3 | 411.5 | 472.1 | 292.7 |
| Other operating income | 1.0 | 0.3 | 2.8 | 2.2 | 2.8 |
| Operating expenses | -425.8 | -86.1 | -401.2 | -414.9 | -245.6 |
| Depreciation and impairment losses | -2.4 | -4.9 | -34.5 | -25.6 | -10.7 |
| Operating result | 3.4 | -3.3 | -21.3 | 33.8 | 39.1 |
| Items affecting comparability | 0.0 | 0.0 | 0.0 | 0.0 | 1.3 |
| Comparable operating result | 3.4 | -3.3 | -21.3 | 33.8 | 40.5 |
| % of sales | 0.8 | -3.8 | -5.2 | 7.2 | 13.8 |
Near-term outlook
Wood demand will focus on thinning sites to be harvested when the ground is unfrozen and, in terms of energy wood, on crown wood. The demand for forest management services will remain stable. The decline in demand for sawn timber attributable to the coronavirus pandemic will reduce harvesting in the Baltic Sea region.
Supported by the production shortfall attributable to the strikes early in the year, the order books for wood products in all product categories are at a higher level than in the corresponding period last year. Even so, the coronavirus pandemic will have a weakening impact on the order stock.
The demand outlook in Kerto LVL products is uncertain as the number of new construction sites declines. The demand for spruce plywood in the main markets will remain good. The demand outlook in birch plywood is unstable.
Demand for long-fibre market pulp has increased as a result of both the significant increase in demand for tissue paper and hygiene products and the weaker availability of recycled paper. At the same time, production curtailments attributable to the availability of wood raw material, particularly in Canada, have reduced the supply of long-fibre market pulp. These factors are expected to keep supply and demand in balance despite the declining demand for printing and writing papers as well as maintenance shutdowns at many mills being postponed until the second half of the year.
The demand for sawn timber is expected to remain at the current level in the main markets. Demand for sawn timber has declined markedly in Europe and North Africa as a result of the coronavirus pandemic. Demand in China has improved since the beginning of the year. The coronavirus pandemic is increasing uncertainty in the pulp and sawn timber markets.
Metsä Board’s paperboard deliveries in the second quarter are expected to be roughly at the same level as in the first quarter of the year. The market prices of folding boxboard in local currencies are expected to remain stable.
The demand for tissue papers which grew strongly during the beginning of the year is expected to level off in the near future. Due to the restrictions on movement imposed to prevent the spread of the coronavirus, demand in the short-term will be more focused on consumer products in both tissue and greaseproof papers. The increased awareness of hygiene resulting from the coronavirus pandemic is expected to increase demand for tissue papers among both consumer and professional customers.
METSÄ GROUP
For further information, please contact:
Vesa-Pekka Takala, EVP, CFO Metsä Group, tel. +358 10 465 4260
Juha Laine, SVP, Communications, Metsä Group, tel. +358 10 465 4541
Metsä Group
www.metsagroup.com
Metsä Group is a forerunner in sustainable bioeconomy utilising renewable wood from sustainably managed northern forests. Metsä Group focuses on wood supply and forest services, wood products, pulp, fresh fibre paperboards and tissue and greaseproof papers.
In 2019, Metsä Group’s sales totalled EUR 5.5 billion, and it employs approximately 9,300 people. Metsäliitto Cooperative is the parent company of Metsä Group and is owned by approximately 103,000 Finnish forest owners.
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