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Metsä Board Oyj Interim / Quarterly Report 2021
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Interim / Quarterly Report
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METSÄ BOARD
INTERIM REPORT
JANUARY-SEPTEMBER 2021
Metsä
Metsä
Interim Report 1 January–30 September 2021
27 October 2021 at 12:00 noon EEST
Page 1/30
METSÄ BOARD'S COMPARABLE OPERATING RESULT IN JANUARY–SEPTEMBER 2021 WAS EUR 295 MILLION
JANUARY–SEPTEMBER 2021 (compared to 1–9/2020)
- Sales were EUR 1,565.6 million (1,416.4).
- Comparable operating result was EUR 295.3 million (156.7), or 18.9% (11.1) of sales. Operating result was EUR 285.0 million (162.7).
- Comparable earnings per share were EUR 0.65 (0.33), and earnings per share were EUR 0.63 (0.34).
- Comparable return on capital employed was 19.4% (11.8).
- Net cash flow from operations was EUR 209.8 million (226.7).
JULY–SEPTEMBER 2021 (compared to 7–9/2020)
- Sales were EUR 516.1 million (471.2).
- Comparable operating result was EUR 104.0 million (62.5), or 20.1% (13.3) of sales. Operating result was EUR 99.4 million (62.5).
- Comparable earnings per share were EUR 0.23 (0.13), and earnings per share were EUR 0.22 (0.13).
- Comparable return on capital employed was 19.1% (14.3).
- Net cash flow from operations was EUR 59.1 million (74.4).
EVENTS IN JULY–SEPTEMBER 2021
- Demand for Metsä Board's fresh fibre paperboards remained strong in all market areas important for the company. The average prices of paperboards increased clearly.
- Cost inflation continues to be rapid. In particular, the prices of energy and chemicals increased.
-
The market situation for pulp remained stable in Europe, but the situation in China is more uncertain. The logistical challenges, particularly between Europe and Asia, continued.
-
Metsä Board's financial position is strong and supports the ongoing investments. At the end of the review period, the interest-bearing net debt was EUR -24.8 million.
- Metsä Board made an investment decision to increase its annual folding boxboard capacity at the Husum integrated mill in Sweden by 200,000 tonnes. The value of the investment is approximately EUR 210 million, and it will be financed with current cash funds as well as future cash flows from operating activities. The investment is estimated to have a positive impact of approximately EUR 50 million on the company's annual comparable EBITDA as of 2026.
- A fire on the chip conveyor of the Husum pulp mill in June led to production losses in paperboard and pulp in July. The company expects to recognise insurance claims for the production losses during the fourth quarter of the year.
- Metsä Board plans to redeem all the shares in Hämeenkyrön Voima Oy from Pohjolan Voima and thereby consolidate its local operations in the Kyröskoski mill area.
EVENTS AFTER THE REVIEW PERIOD
On 12 October 2021, the European Commission announced that it was conducting an investigation at Metsä Board Corporation's associated company Metsä Fibre as part of a wider EU-level antitrust investigation of companies active in the wood pulp sector. Metsä Board is not subject to investigation.
RESULT GUIDANCE FOR OCTOBER–DECEMBER 2021
Metsä Board's comparable operating result in October–December 2021 is expected to be weaker than in July–September 2021 (EUR 104.0 million).
Metsä
Interim Report 1 January–30 September 2021
27 October 2021 at 12:00 noon EEST
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IMPACT OF CORONAVIRUS PANDEMIC ON METSÄ BOARD'S BUSINESS OPERATIONS
The coronavirus pandemic has increased demand for pure and safe packaging materials, particularly for end uses in the food and pharmaceutical industries. Correspondingly, the pandemic has weakened demand for the packaging materials of luxury items and graphic end uses to some degree. The increase in vaccination coverage and the gradual lifting of the restrictions imposed during the pandemic have increased people's public activeness. Among other things, this has increased demand for food service packaging. Demand for packaging materials made from fresh fibre has been extremely strong during the year in nearly all end-uses.
Metsä Board's production and deliveries have run smoothly during the pandemic. No chains of coronavirus transmissions have occurred, and the numbers of individual infections have also decreased towards the end of the year.
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, has supported the financial headroom.
The company continues to employ precautionary measures that aim to ensure the health of employees and the continuity of business operations, and prevent the spread of virus. Despite the precautionary measures, a prolonged pandemic could lead to disruptions in production and/or the supply chain.
METSÄ BOARD'S CEO MIKA JOUKIO:
"Demand for sustainable fresh fibre paperboards has been strong across all end-uses and all of our market areas. Our profitability has developed very well this year, and the favourable market situation provides us with an excellent start for next year.
In July–September, the delivery volumes of our paperboards declined slightly from the previous quarter, and
were 475,000 tonnes. The decline in delivery volumes was partly attributable to the fire at the Husum pulp mill in the summer, causing losses in both paperboard and market pulp production.
Our comparable operating result in July–September was EUR 104 million, or 20.1% of sales. Correspondingly, our comparable operating result in January–September was EUR 295 million. Our profitability improved thanks to the increased prices for paperboards and market pulp, as well as the higher sales volumes of paperboards.
At the same time, our result was burdened by faster than expected cost inflation. In particular, the prices of energy, chemicals and logistics have increased rapidly over recent months. Total costs in 2021 will be significantly higher than they were last year. We expect cost level to remain high also in 2022.
Our interest-bearing net debt was negative at the end of the review period. Our strong financial position creates a solid basis for our sustainable investments in growth and development, of which we have several ongoing and planned. The renewal of the Husum pulp mill will increase our competitiveness and take us closer to our ambitious sustainability targets for a fossil free future. By increasing our folding boxboard and white kraftliner capacity, we are responding to the growing demand of our customers. Our total investments in 2021–2022 will amount to approximately EUR 450–550 million.
Together with our partners, we are continuously developing and testing innovative solutions which support circular economy. During the review period, we announced collaboration with the Finnish startup company The Paper Lid Company. In addition, we've launched a 360 service, which benefits our customers across the packaging value chain. Reducing the volume of plastic waste is more important than ever, and this has been visible in the rapidly growing demand for our dispersion barrier coated paperboard, for example. Paperboard packaging made from a renewable material is a good alternative to plastic. They are easy to recycle and can create positive consumer experiences."
Metsä
Interim Report 1 January–30 September 2021
27 October 2021 at 12:00 noon EEST
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KEY FIGURES
| | 2021
Q3 | 2020
Q3 | 2021
Q2 | 2021
Q1–Q3 | 2020
Q1–Q3 | 2020
Q1–Q4 |
| --- | --- | --- | --- | --- | --- | --- |
| Sales, EUR million | 516.1 | 471.2 | 555.8 | 1,565.6 | 1,416.4 | 1,889.5 |
| EBITDA, EUR million | 125.4 | 84.7 | 126.3 | 357.4 | 236.6 | 321.8 |
| comparable, EUR million | 125.4 | 84.7 | 125.2 | 363.1 | 230.6 | 315.8 |
| EBITDA, % of sales | 24.3 | 18.0 | 22.7 | 22.8 | 16.7 | 17.0 |
| comparable, % of sales | 24.3 | 18.0 | 22.5 | 23.2 | 16.3 | 16.7 |
| Operating result, EUR million | 99.4 | 62.5 | 103.7 | 285.0 | 162.7 | 227.3 |
| comparable, EUR million | 104.0 | 62.5 | 102.5 | 295.3 | 156.7 | 221.2 |
| Operating result, % of sales | 19.3 | 13.3 | 18.6 | 18.2 | 11.5 | 12.0 |
| comparable, % of sales | 20.1 | 13.3 | 18.4 | 18.9 | 11.1 | 11.7 |
| Result before taxes, EUR million | 96.4 | 58.1 | 99.8 | 275.1 | 150.8 | 212.3 |
| comparable, EUR million | 100.9 | 58.1 | 98.7 | 285.4 | 144.8 | 206.3 |
| Result for the period, EUR million | 85.4 | 47.0 | 85.9 | 235.5 | 120.8 | 170.1 |
| comparable, EUR million | 89.0 | 47.0 | 84.9 | 245.0 | 116.0 | 165.3 |
| Earnings per share, EUR | 0.22 | 0.13 | 0.23 | 0.63 | 0.34 | 0.48 |
| comparable, EUR | 0.23 | 0.13 | 0.22 | 0.65 | 0.33 | 0.46 |
| Return on equity, % | 19.7 | 14.6 | 21.1 | 19.8 | 12.2 | 12.5 |
| comparable, % | 20.6 | 14.6 | 20.8 | 20.6 | 11.7 | 12.1 |
| Return on capital employed, % | 18.2 | 14.3 | 19.9 | 18.7 | 12.2 | 12.6 |
| comparable, % | 19.1 | 14.3 | 19.7 | 19.4 | 11.8 | 12.2 |
| Equity ratio¹), % | 65 | 59 | 63 | 65 | 59 | 60 |
| Net gearing¹), % | -1 | 21 | 0 | -1 | 21 | 17 |
| Interest-bearing net liabilities/comparable EBITDA | -0.1 | 1.0 | 0.0 | -0.1 | 1.0 | 0.7 |
| Shareholders' equity per share¹), EUR | 4.63 | 3.69 | 4.36 | 4.63 | 3.69 | 3.89 |
| Interest-bearing net liabilities¹), EUR million | -24.8 | 277.3 | 3.7 | -24.8 | 277.3 | 235.5 |
| Total investment, EUR million | 35.3 | 44.4 | 63.4 | 133.6 | 117.5 | 166.4 |
| Net cash flow from operations, EUR million | 59.1 | 74.4 | 134.0 | 209.8 | 226.7 | 307.7 |
| Personnel¹) | 2,389 | 2,398 | 2,623 | 2,389 | 2,398 | 2,370 |
¹) At the end of the period
DELIVERY AND PRODUCTION VOLUMES
| 1,000 tonnes | 2021
Q3 | 2021
Q2 | 2021
Q1 | 2020
Q4 | 2020
Q3 | 2021
Q1–Q3 | 2020
Q1–Q3 | 2020
Q1–Q4 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Delivery volumes | | | | | | | | |
| Folding boxboard | 319 | 348 | 329 | 297 | 318 | 996 | 926 | 1,223 |
| White kraftliner | 156 | 166 | 162 | 144 | 143 | 484 | 443 | 587 |
| Metsä Board's market pulp¹) | 104 | 156 | 116 | 158 | 107 | 376 | 363 | 521 |
| Metsä Fibre's market pulp²) | 178 | 185 | 196 | 207 | 168 | 558 | 489 | 696 |
| Production volumes | | | | | | | | |
| Folding boxboard | 317 | 318 | 342 | 317 | 311 | 977 | 933 | 1,249 |
| White kraftliner | 155 | 160 | 164 | 168 | 137 | 479 | 423 | 591 |
| Metsä Board's pulp¹) | 335 | 329 | 362 | 359 | 335 | 1,027 | 1,012 | 1,371 |
| Metsä Fibre's pulp²) | 184 | 194 | 186 | 174 | 188 | 564 | 528 | 702 |
¹) Includes chemical pulp and high-yield pulp (BCTMP).
²) Equal to Metsä Board's 24.9% holding in Metsä Fibre.
Interim Report 1 January–30 September 2021
27 October 2021 at 12:00 noon EEST
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Comparable operating result, EUR million and % of sales
Comparable return on capital employed, %
INTERIM REPORT
1 JANUARY–30 SEPTEMBER 2021
SALES AND RESULT
July–September 2021 (compared to 7–9/2020)
Metsä Board's sales were EUR 516.1 million (471.2). Folding boxboard accounted for 58% (61) of sales, while 26% (24) of sales came from white kraftliners, 12% (10) from market pulp and 4% (6) from other operations.
The delivery volumes of paperboards totalled 475,000 tonnes (461,000), of which 67% (67) was delivered to the EMEA region, 26% (28) to the Americas, and 7% (5) to the APAC region. Metsä Board's market pulp deliveries were 104,000 tonnes (107,000).
The comparable operating result of the review period was EUR 104.0 million (62.5), and the operating result was EUR 99.4 million (62.5). A EUR -4.6 million item affecting comparability is related to an impairment recognised in the current paperboard production assets of the Husum pulp mill, which the company plans to replace in the investment increasing the mill's folding boxboard capacity.
The comparable operating result improved due to the increased average prices of paperboards and market pulp, and the sale of EUR 5 million in emission allowances.
The associated company Metsä Fibre's share of Metsä Board's comparable operating result in July–September was EUR 42.8 million (2.4).
The comparable operating result in July–September was weakened by cost inflation. The higher price of electricity increased energy costs in particular. Logistics costs were also higher than in the corresponding period in the previous year.
Exchange rate fluctuations, including hedges, had a negative impact of around EUR 18 million on the operating result compared to the corresponding period in the previous year.
Financial income and expenses totalled EUR -3.1 million (-4.3), including foreign exchange rate differences from accounts receivable, accounts payable, financial items and the valuation of currency hedging instruments, totalling EUR -0.3 million (-1.3).
The result before taxes was EUR 96.4 million (58.1). The comparable result before taxes was EUR 100.9 million (58.1). Income taxes amounted to EUR 11.0 million (11.1).
Earnings per share were EUR 0.22 (0.13). The comparable earnings per share were EUR 0.23 (0.13). The return on equity was 19.7% (14.6), and the comparable return on equity was 20.6% (14.6). The return on capital employed was 18.2% (14.3), and the comparable return on capital employed was 19.1% (14.3).
January–September 2021 (compared to 1–9/2020)
Metsä Board's sales were EUR 1,565.6 million (1,416.4). Folding boxboard accounted for 58% (60) of sales, while 25% (25) of sales came from white kraftliners, 13% (11) from market pulp and 5% (4) from other operations.
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Total deliveries of paperboards were 1,480,000 tonnes (1,369,000), of which 66% (69) was delivered to the EMEA region, 27% (26) to the Americas, and 6% (5) to the APAC region. Metsä Board's market pulp deliveries were 376,000 tonnes (363,000).
The comparable operating result was EUR 295.3 million (156.7), and the operating result was EUR 285.0 million (162.7). The review period's items affecting comparability totalled EUR -10.3 million, comprising a EUR 7.0 million capital gain from the sale of a land area not related to business operations; a EUR -6.9 million impairment recognised in the assets of Metsä Fibre's Kemi pulp mill; EUR 5.8 million in costs related to the chip conveyor fire at the Husum pulp mill; and a EUR -4.6 million impairment recognised in the current paperboard production assets in Husum.
The paper industry strike, which affected all Metsä Board mills in Finland and all Metsä Fibre pulp mills, had a negative impact of around EUR 20 million on the comparable operating result in January–September 2020.
The comparable operating result of the review period improved due to the increased average prices and delivery volumes of paperboards, and the increased average prices of market pulp.
Metsä Board's share of the comparable operating result of its associated company Metsä Fibre was EUR 87.7 million (-0.2). In addition to the strong price increase in market pulp, Metsä Fibre's profitability improved due to higher demand for sawn timber and increased price levels.
Cost inflation during the review period was rapid. In particular, higher electricity prices increased energy costs, in addition to which the prices of some chemicals increased. Logistics and personnel expenses also increased from the comparison period. Wood costs declined slightly.
Exchange rate fluctuations, including hedges, had a negative impact of around EUR 40 million on the operating result compared to the comparison period.
Financial income and expenses totalled EUR -10.0 million (-11.8), including foreign exchange rate differences from accounts receivable, accounts payable, financial items and the valuation of currency hedging instruments, totalling EUR -1.7 million (-3.1).
The result before taxes was EUR 275.1 million (150.8). The comparable result before taxes was EUR 285.4 million (144.8). Income taxes amounted to EUR 39.6 million (30.0).
Earnings per share were EUR 0.63 (0.34). The comparable earnings per share were EUR 0.65 (0.33). The return on equity was 19.8% (12.2), and the comparable return on equity was 20.6% (11.7). The return on capital employed was 18.7% (12.2), and the comparable return on capital employed was 19.4% (11.8).
Operating result in July–September 2021 in brief (compared to 4–6/2021)
The comparable operating result in July–September was EUR 104.0 million (102.5). The operating result improved due to the increased average prices of market pulp and paperboards, and the sale of EUR 5 million in emission allowances. The associated company Metsä Fibre's share of Metsä Board's comparable operating result in July–September was EUR 42.8 million (31.7). Profitability weakened due to the lower delivery volumes of paperboards and especially market pulp, higher energy prices and the negative impact of exchange rate fluctuations.
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27 October 2021 at 12:00 noon EEST
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MARKET DEVELOPMENT
The table below shows the market situation of paperboard grades important for Metsä Board in Europe and the United States, as well as the development of the PIX market prices of pulp in Europe and China. The changes in market prices have been calculated from the review period's average prices. Sources: Fastmarkets FOEX, Fastmarkets RISI, CEPI Cartonboard, CEPI Containerboard, AFPA.
| Q3/21 vs Q3/20 | Q3/21 vs Q2/21 | Q1–Q3/21 vs Q1–Q3/20 | |
|---|---|---|---|
| Paperboard deliveries | |||
| Folding boxboard/white kraftliners, Europe (deliveries of European producers) | increased clearly / increased clearly | decreased clearly / stable | increased clearly / increased clearly |
| Solid bleached board/food service paperboard, United States (production for local consumption) | increased clearly / increased clearly | increased clearly / increased clearly | stable/ increased clearly |
| Market prices of paperboards in local currencies | |||
| Folding boxboard/white kraftliners, Europe | increased clearly / increased clearly | increased clearly / increased clearly | increased clearly / increased clearly |
| Solid bleached board/food service paperboard, United States | increased clearly / increased clearly | increased clearly / increased clearly | increased clearly / increased clearly |
-1% < stable < +1%, increased (decreased): +1...+2% (-1%...-2%), increased clearly (decreased clearly): > +2% (< -2%)
| Market prices of pulp, PIX, USD | |||
|---|---|---|---|
| Long-fibre/short-fibre pulp in Europe | +59% / +67% | +12% / +13% | +39% / +43% |
| Long-fibre/short-fibre pulp in China | +50% / +48% | -12% / -15% | +55% / +49% |
METSÄ BOARD'S BUSINESS DEVELOPMENT
Metsä Board produces high-quality, ecological fresh fibre paperboards, and is Europe's largest producer of folding boxboard and white kraftliners. Metsä Board's folding boxboard is mainly used in consumer product packaging, like food and pharmaceutical packaging. Correspondingly, the end uses of white kraftliners are mainly related to the various packaging needs of the retail sector. More than half of the white kraftliners made by Metsä Board are coated. The annual paperboard capacity is around 2 million tonnes, and it is sold to more than 100 countries, with the main market areas being Europe and the North America.
Metsä Board aims to be self-sufficient in pulp, which ensure a consistently high quality in paperboard production. The company produces chemical pulp and bleached high-yield pulp (BCTMP), which are used in its own paperboard production, while some are sold as
market pulp. Metsä Board owns 24.9% in its associated company Metsä Fibre. Like Metsä Board, Metsä Fibre is part of Metsä Group, and is a leading producer of wood-based bioproducts such as pulp, sawn timber, biochemicals and bioenergy.
Paperboard sales January–September 2021 (1–9/2020)
Metsä Board's paperboard deliveries in January–September 2021 totalled 1,480,000 tonnes (1,369,000). Paperboard deliveries grew in all Metsä Board's market areas compared to the corresponding period last year.
Deliveries of folding boxboard were 996,000 tonnes (926,000), of which 69% (71) was delivered to the EMEA region, 23% (22) to the Americas, and 9% (7) to the APAC region. Deliveries of white kraftliners were
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484,000 tonnes (443,000), of which 62% (63) was delivered to the EMEA region, 37% (36) to the Americas, and 2% (2) to the APAC region.
Demand for folding boxboard has been very strong across all end-uses during the current year. The coronavirus pandemic has increased the consumption of products consumed at home and the demand for food packaging in particular. Customers' interest in Metsä Board's dispersion-coated barrier paperboard has increased markedly, and the growth in delivery volumes is expected to continue next year. Demand for white kraftliners has been supported by the brisk retail sector and the growth in e-commerce.
In addition to strong demand, the market situation in Europe has tightened due to the reduced import volumes of paperboard, especially from Asia.
Metsä Board has increased the prices of folding boxboard and white kraftliners several times during the review period in all its market areas. Average paperboard prices are expected to continue to increase, given that some of the price increases will take effect in the fourth quarter of 2021, and some from the beginning of 2022.
Market pulp sales January–September 2021 (1–9/2020)
Metsä Board’s market pulp deliveries were 376,000 tonnes (363,000) during the review period. Delivery volumes declined due to the fire at the Husum pulp mill’s chip conveyor in the summer.
The associated company Metsä Fibre’s total pulp deliveries amounted to 2,271,000 tonnes (1,962,000). Around 50% of Metsä Fibre’s market pulp is sold in the EMEA region and 50% in the APAC region, where China accounts for a significant share. Metsä Board holds 24.9% of Metsä Fibre.
In Europe, demand for long-fibre pulp was supported particularly by the increased consumption of paperboard and the increase in the capacity utilisation rates of printing paper mills. Market prices remained stable during the third quarter.
In China, the strong demand for market pulp during the first half of the year weakened after the summer. Demand has declined, among other things, due to the production shutdowns in paper and paperboard mills as the country seeks to reduce energy consumption to achieve its environmental goals. The market prices of pulp in China have declined and are currently below their price level in Europe.
The global problems in the availability of containers have continued and affected the supply of market pulp.
Production January–September 2021 (1–9/2020)
The paperboard production volume during the review period totalled 1,456 000 tonnes (1,356,000), and the combined production volume of pulp and high-yield pulp amounted to 1,027 000 tonnes (1,012,000).
Production in the comparison period was limited by the paper industry’s strike, which lasted for more than two weeks and concerned all of Metsä Board’s paperboard and BCTMP mills in Finland. The loss in paperboard production during the strike was roughly 65,000 tonnes, and the loss in BCTMP production some 34,000 tonnes.
Several planned annual maintenance shutdowns took place during the third quarter, the most significant at the Kemi integrated mill. The duration of all annual maintenance shutdowns remained at the planned level.
A fire which broke out on the chip conveyor of the Husum pulp mill on 18 June closed Husum’s pulp production for approximately four weeks. Paperboard production was run at a lower-than-normal capacity following the pulp mill’s shutdown. The production losses resulting from the fire amounted to roughly 50,000 tonnes in pulp and roughly 30,000 tonnes in paperboard.
CASH FLOW
Net cash flow from operations in January–September 2021 was EUR 209.8 million (1–9/2020: 226.7). Working capital increased by EUR 21.3 million (increase of 2.1). In July–September, net cash flow from operations was EUR 59.1 million (7–9/2020: 74.4).
BALANCE SHEET AND FINANCING
Metsä Board’s equity ratio at the end of the review period was 65% (31 December 2020: 60) and the net gearing ratio was -1% (17). The ratio of interest-bearing net liabilities to comparable EBITDA in the previous 12 months was -0.1 (0.7).
At the end of the review period, interest-bearing liabilities totalled EUR 451.5 million (31 December 2020: 452.4). Non-euro-denominated loans accounted for 1.5% of loans and floating-rate loans for 10.0%, with the rest being fixed-rate loans. The average interest rate on liabilities was 2.3% (2.3), and the average maturity of non-current liabilities was 5.0 years (5.7). The interest rate maturity of loans was 44.6 months (52.0).
At the end of the review period, interest-bearing net debt totalled EUR -24.8 million (31 December 2020: 235.5).
Metsä Board’s liquidity has remained strong. At the end of the review period, the available liquidity was EUR 865.3 million (31 December 2020: 605.8), consisting of
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the following items: liquid assets and investments of EUR 473.6 million, a syndicated credit facility (revolving credit facility) of EUR 200.0 million, and other committed credit facilities of EUR 191.8 million. Of the liquid assets, EUR 461.2 million consisted of short-term deposits with Metsä Group Treasury, and EUR 12.4 million were cash funds and investments. Other interest-bearing receivables amounted to EUR 2.8 million. In addition to items reported as liquidity, the liquidity reserve is complemented by Metsä Group's internal undrawn short-term credit facility of EUR 150.0 million and undrawn pension premium (TyEL) funds of EUR 212.3 million
The fair value of other non-current investments was EUR 190.8 million at the end of the review period (31 December 2020: 186.9). The change is related to the increase in the fair value of Pohjolan Voima Oyj's shares.
At the end of the review period, an average of 8.2 months of the net foreign currency exposure was hedged, including the hedging of the balance sheet position of trade receivables and trade payables (31 December 2020: 7.9). The degree of hedging during the period varied between seven and nine months, on average. In addition to the balance sheet position, half of the projected annual net foreign currency exposure at the normal level is hedged. The amount of hedging may deviate from the normal level by 40% in either direction. When hedging is at the normal level, the aim is to allocate the hedges primarily to the following two quarters.
Metsä Board has investment grade credit ratings by S&P Global and Moody's Investor Service. The company's rating by S&P Global is BBB-, with a stable outlook. The company's rating by Moody's is Baa3, with a stable outlook.
INVESTMENTS
Investments during the review period totalled EUR 133.6 million (1–9/2020: 117.5), of which investments in own property, plant and equipment were EUR 130.7 million (113.0) and investments in leased property, plant and equipment were EUR 2.9 million (4.5). Maintenance investments and development investments accounted for approximately 84% and 16%, respectively, of the total investments.
Renewal of the Husum pulp mill
In 2019, Metsä Board announced that it would begin the renewal of the Husum pulp mill in phases. The investment cost of the first phase in the pulp mill's renewal, comprising a new recovery boiler and turbine, is approximately EUR 360 million. By the end of the review period, the investments made in the project totalled approximately EUR 227 million. According to estimates, the new recovery boiler and turbine will be taken into use during the first half of 2022. The first phase of the renewal of the pulp mill is estimated to improve Metsä Board's annual cash flow with approximately EUR 35 million as of 2023.
The plan is to replace the current fibre lines with a new fibre line during the second phase of the investment in the 2020s.
The renewal project will enable the long-term development and growth of competitive paperboard business operations at the Husum integrated mill over the coming years. In addition, the investment aims to develop Metsä Board's pulp and energy production and enable a shift towards fossil free mills.
Development programme of the Kemi paperboard mill
In the beginning of the year, Metsä Board initiated the development programme of its Kemi paperboard mill, which produces white-top kraftliner. The programme's investment cost is approximately EUR 67 million, and the mill's annual paperboard capacity will increase by around 40,000 tonnes. The programme includes a series of modernisation and bottleneck investments in the paperboard machine. As part of the programme, Metsä Board will also buy a modernised production line for unbleached pulp from Metsä Fibre. The production line's annual capacity is roughly 180,000 tonnes. The investments will take place in 2021–2023, with an emphasis on 2023. The development programme is a significant step towards the company's 2030 sustainability targets.
Increasing the paperboard capacity at Husum
Metsä Board will increase its folding boxboard capacity by 200,000 tonnes per year at the Husum integrated mill in Sweden. Following the investment, the folding boxboard capacity of paperboard machine BM1 will be 600,000 tonnes per year. The additional capacity will become available on the market in 2024–2025. The value of the investment is approximately EUR 210 million. It will take place in 2021–2024, with an emphasis on 2022 and 2023. The investment will be financed with current cash funds, as well as the cash flow from operating activities.
The investment is expected to increase Metsä Board's annual sales by approximately EUR 200 million. In addition, the investment is expected to have a positive impact of approximately EUR 50 million on the company's annual comparable EBITDA. The company expects to achieve the growth and improved result in full in 2026.
Husum's port concept will be reviewed separately, taking into account the growing logistics volumes in the entire integrated mill, and the potentially necessary investments will be decided at a later date.
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Associated company Metsä Fibre’s Kemi bioproduct mill
Metsä Board’s associated company Metsä Fibre is building a new bioproduct mill in Kemi. The new bioproduct mill will produce annually some 1.5 million tonnes of softwood and hardwood pulp, as well as other bioproducts. The value of the investment is approximately 1.6 billion euros, and it is expected to be completed in 2023. The bioproduct mill will not use any fossil fuels, and its electricity self-sufficiency will be 250%. The pulp production capacity includes the existing pulp production line for unbleached pulp used in the production of white kraftliner, with an annual capacity of roughly 180,000 tonnes. The new mill will replace the current pulp mill in Kemi, with an annual capacity of about 620,000 tonnes.
The financing of Metsä Fibre’s bioproduct mill is composed of internal financing and debt. Metsä Board will not invest equity in Metsä Fibre to finance the project.
Metsä Board holds 24.9% of Metsä Fibre.
PERSONNEL
At the end of the review period, the number of personnel was 2,389 (30 September 2020: 2,398), of whom 1,435 (1,440) were based in Finland. In January–September, Metsä Board employed 2,486 people on average (1–9/2020: 2,481). Personnel expenses in January–September totalled EUR 161.2 million (144.2). Personnel expenses in the comparison period were lowered by the paper industry strike in Finland.
SUSTAINABILITY
Metsä Board aims to be a forerunner in sustainability. Climate change mitigation as well as the sustainable and efficient use of resources are strong drivers of the company’s operations.
KEY SUSTAINABILITY FIGURES
| 2021 Q3 | 2020 Q3 | 2021 Q1–Q3 | 2020 Q1–Q3 | 2020 Q1–Q4 | Target year 2030 | |
|---|---|---|---|---|---|---|
| Total recordable incident frequency TRIF^{1)} | 10.1 | 12.2 | 11.1 | 9.1 | 8.4 | 0 |
| Lost-time accidents frequency LTA1F^{1)} | 7.1 | 8.1 | 8.1 | 6.1 | 5.7 | 0 |
| Share of certified wood fibre, % | 82% | 81% | 82% | 80% | 80% | >90% |
| Energy efficiency improvement^{2)} | +1.9% | +1.5% | - | - | +2.1% | +10% |
| Reduction in process water use^{2)} | -13.2% | -7.1% | - | - | -7.7% | -30% |
1) per million hours worked
2) change from the base year of 2018, per tonne produced, rolling 12 months
Safety at work
There were fewer occupational accidents in July–September 2021 than in the corresponding period the previous year. However, in January–September 2021, the accident frequency was higher than in the previous year. Most of the accidents consisted of injuries to the hands and feet. All Metsä Board’s production units comply with the ISO 45001 management system, and the goal of the company’s safety-at-work standards is to prevent accidents. Compliance with the standards is supported through additional training and communication. The target is zero accidents.
Share of certified wood fibre
All the wood used by Metsä Board comes from sustainably managed Northern European forests. In July–September 2021, certified wood fibre accounted for 82% of all wood fibre purchased by the company, as well as in January–September, 82%. The target is for at least 90% of the wood fibre used by Metsä Board to be certified by the end of 2030.
Energy and water consumption, CO2 emissions
During the last 12-month period, the use of process water per tonne produced reduced by 13.2%, and energy efficiency improved by 1.9% compared to the base year 2018. Metsä Board has financing arrangements whose
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pricing is tied to sustainability targets, such as reducing the specific consumption of energy and water.
Some 83% of the energy used by Metsä Board is based on fossil free energy sources. The target is to abandon the use of fossil-based energy altogether by the end of 2030, at which point the company's direct and indirect fossil-based carbon dioxide emissions (Scope 1 and 2) will drop to zero. By then, the raw materials and packaging materials used by the company must also be fossil free. The company's reduction targets for greenhouse gas emissions have been approved by the Science Based Targets initiative, and they meet the strictest requirements of the Paris Agreement, which aim to limit global warming to 1.5 degrees. Metsä Board's reduction targets for the emissions of the company's value chain (Scope 3) also meet SBTi's strictest criteria and accord with current best practices.
Other important developments
During the review period, the company published its Metsä For All vision, in which the company commits itself to ensuring that personal characteristics – such as gender, age, ethnic background, sexual orientation and disability – have no impact on an individual's opportunity to succeed in working life. Diversity, equality and inclusion will be promoted and measured according to set targets.
Metsä Board has achieved the highest level, Platinum, in the EcoVadis sustainability assessment. This puts it among the top 1% in the category of paper, paperboard and packaging manufacturers. The company is included on CDP's Climate A and Water A lists as recognition for its climate change mitigation and sustainable use of water resources. In the sustainable use of forests, the company has achieved an A- rating. According to CDP, Metsä Board is also included on CDP's Supplier Engagement Rating Leaderboard for supply chain engagement on climate issues. In addition, the Financial Times named Metsä Board among its list of Europe's Climate Leaders, i.e. the 300 companies which have reduced their direct and indirect greenhouse gas emissions (Scope 1 and Scope 2) most in relation to their sales in 2014–2019.
An oil spill into the sea occurred at Metsä Board's Husum mill on 16–17 September. The spill originated from the mill's oil burner. Metsä Board has supported the incident's investigation, and the clean-up of the oil from the sea and the shores with all the necessary resources.
Sustainability is discussed in more detail on the company's website at www.metsaboard.com/sustainability
R&D AND INNOVATION
In folding boxboard and white kraftliners, Metsä Board continues the development work aiming to reduce the weight of paperboard while not compromising on its strength and conversion properties. This creates a good basis for increasing the company's paperboard capacity in the near future.
The company continues to develop barrier solutions and is investigating their commercial potential in food and food service applications. The development of barrier solutions is also part of the ExpandFibre programme, Fortum and Metsä Group's EUR 50 million programme promoting the circular bioeconomy.
During the review period, the Finnish start-up company The Paper Lid Company announced that it would bring an entirely recyclable paperboard lid suitable for paper cups to the markets in cooperation with Metsä Board. The carbon footprint of the paperboard lid is at least 50% less than that of a plastic lid, in addition to which it is entirely recyclable.
Metsä Group's innovation company Metsä Spring and Valmet are building a demo plant in Änekoski. The plant will produce new kinds of 3D fibre products directly from wood fibre pulp, without intermediate phases. End uses will include food packaging. The first test runs will be carried out during the fourth quarter of the year.
CHANGES IN THE CORPORATE MANAGEMENT TEAM
Markku Leskelä was appointed Senior Vice President, Development, and a member of the Corporate Management Team, in charge of research, product development, sustainability and business development. Ari Kiviranta, member of the Corporate Management Team, was appointed Senior Vice President, Technology, in charge of developing the company's industrial structure, especially at the Husum mill in Sweden, and of strategic investments and technology. The appointments took effect on 1 October 2021.
LEGAL PROCEEDINGS
In the autumn of 2015, the Finnish Tax Administration, in its assessment of the 2014 taxation, refused the deductibility of certain losses related to the cross-border merger of a French subsidiary in Metsä Board Corporation's 2014 taxation.
Metsä Board appealed the decision issued by the Tax Administration, as the company believes the losses to be deductible. The Tax Administration's Adjustment Board dismissed the company's appeal in March 2018. In February 2021, the Administrative Court of Helsinki
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dismissed the appeal made by the company on the Adjustment Board's decision. In its decision of September 2021, the Supreme Administrative Court did not grant Metsä Board leave to appeal the matter, due to which the dismissal of the Administrative Court of Helsinki remains valid, and the case is closed.
SHARES
At the end of the review period, the price for Metsä Board's B share on the Nasdaq Helsinki was EUR 8.10. The share's highest and lowest prices were EUR 11.01 and EUR 8.03, respectively. At the end of the review period, the price for Metsä Board's A share on the Nasdaq Helsinki was EUR 9.18. At the end of the review period, the average daily trading volumes of the B and A shares on the Nasdaq Helsinki were 410,793 shares and 8,629 shares, respectively. The total trading volume of the B share was EUR 726,061,002, and the total trading volume of the A share was EUR 15,434,026.
At the end of the review period, the market value of all Metsä Board shares was EUR 2.9 billion, of which the market value of the B shares and the A shares accounted for EUR 2.6 billion and EUR 0.3 billion, respectively.
At the end of the review period, Metsäliitto Cooperative held 48% (30 September 2020: 48) of all shares, and the votes conferred by these shares accounted for 67% (67) of the total votes. International and nominee-registered investors held approximately 15% (16) of all shares. The company does not hold any treasury shares.
NEAR-TERM RISKS AND UNCERTAINTIES
A prolongation of the coronavirus pandemic may cause disruptions in Metsä Board's production and supply chains. On the other hand, the accommodative monetary policy during the pandemic, combined with the positive economic impacts of the recovery from the pandemic, may lead to overheating of the economy. The unwinding of the situation may have sudden negative effects on the world economy and thereby on the demand for Metsä Board's products and the company's profitability. In addition, customers' weaker cash position or slower payment behaviour may have an impact on Metsä Board's cash flow and lead to credit losses.
A weakening in the availability of global freight capacity may result in additional costs or restrict paperboard and pulp deliveries altogether, thereby having a negative effect on the company's profitability.
There are also other considerable uncertainties in the global economy. If realised, they may result in weakened demand and reduced prices for paperboard and pulp products. An imbalance in supply and demand
may impact the prices of end products and Metsä Board's profitability.
Various countries have imposed import duties and other trade restrictions on each other's products, but these have not had a direct impact on Metsä Board's business operations so far. Negative developments in world trade could, if continued, weaken Metsä Board's profitability.
There are several geopolitical risk concentrations around the world, and forecasting developments in them is difficult. Changes in these areas may be very sudden and unpredictable. There have been, and will continue to be, international sanctions related to these crises, and they may also have a direct or indirect impact on the demand for paperboards and, therefore, on Metsä Board's profitability.
Metsä Board is focusing on the active development and growth of its paperboard business. The growth of the paperboard business and the introduction of new products to the markets depend on the success of sales. Increasing sales on a global scale also involves cost and exchange rate risks. In addition, the acceptability and taxation of various packaging materials involve regulatory risks.
A majority of Metsä Board's production is located in Finland. Finland has a history of labour disputes in both the forest industry and the distribution chain of forest industry products. These may have a negative impact on production volumes and customer deliveries, and weaken the company's competitiveness and profitability.
Wood accounts for more than a quarter of Metsä Board's total costs. The availability of the wood raw material becoming more difficult or a sudden increase in prices would have a weakening effect on Metsä Board's result.
Metsä Board's climate risks mainly concern forests and the use of energy and water. Regulation may steer the future use of forests. Increased regulation aiming to mitigate climate change and reduce greenhouse gas emissions may, furthermore, increase costs and result in substantial change requirements applicable to production technology. The supply and demand of products in a low-carbon economy may differ from the current situation. Climate change may cause an increasing number of extreme weather phenomena, such as storms, floods and drought, and weaken the availability of the process water and electricity required by mills and result in breaks in production. Extreme weather conditions may also limit the availability of the wood raw material. Should they materialise, climate risks could have a negative impact on Metsä Board's profitability.
Changes in the market price of pulp have a significant impact on Metsä Board's profitability. A 10% decline (in
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crease) in the price of market pulp would have an approximately EUR 30 million negative (positive) impact on the company's annual operating result.
The US dollar strengthening by 10% against the euro would have a positive impact of approximately EUR 77 million on Metsä Board's annual operating result. Correspondingly, the Swedish krona strengthening by 10% would have a negative impact of approximately EUR 45 million. The British pound strengthening by 10% would have a positive impact of approximately EUR 9 million. The impact of weakened exchange rates would be the opposite. The sensitivities do not include the impact of hedging.
The forward-looking estimates and statements in this interim report are based on current plans and estimates. For this reason, they contain risks and other uncertainties that may cause the results to differ from the statements concerning them. In the short term, Metsä Board's result will be particularly affected by the price of and demand for finished products, raw material costs, the price of energy, and the exchange rate development of the euro compared to the company's other main currencies.
Further information on long-term risks and risk management is available on pages 53-55 of Metsä Board's 2020 Annual Report.
NEAR-TERM OUTLOOK
Demand for paperboards is expected to remain good in the company's main market areas in Europe and the North America. Paperboard order books are at a high level.
Metsä Board's paperboard delivery volumes in October–December are expected to decline from the delivery volumes in July–September. The decline is due to the annual maintenance shutdowns at the end of the year, low inventory levels, and possibly seasonally slower December. The delivery volumes of market pulp, on the other hand, are expected to increase slightly.
The average prices of folding boxboard and white kraftliners are expected to increase in October–December compared to the average prices in July–September.
Demand for softwood pulp is expected to remain good in Europe. Energy restrictions and carbon emission cuts initiated by the Chinese government will create uncertainty in the operating rates of paper and paperboard machines and thus in the consumption of market pulp for the rest of the year.
More planned annual maintenance shutdowns are set to take place in October–December compared to July–September.
Cost inflation is expected to continue. In particular, the prices of chemicals and energy will continue to rise.
Metsä Board estimates the full-year cost inflation in 2021 to be at least 4% compared to 2020.
Exchange rate fluctuations in October–December 2021, including hedges, will have a slightly negative impact on the operating result compared to July–September 2021, and a clearly negative impact on the operating result compared to October–December 2020.
In the fourth quarter, Metsä Board expects to recognise insurance claims attributable to the production losses caused by the fire at Husum.
ANNUAL MAINTENANCE AND INVESTMENT SHUTDOWNS IN 2021
The annual maintenance shutdowns of paperboard and BCTMP mills in Finland are spread evenly over the second, third and fourth quarters of 2021.
A modernisation of the finishing area will be carried out at the Kyro mill in the fourth quarter. This will result in a 2–3 week loss in production.
Most significant planned annual maintenance and investment shutdowns at mills in 2021
| Q1/2021 | No large-scale maintenance activities |
|---|---|
| Q2/2021 | Metsä Fibre’s Rauma pulp mill |
| Q3/2021 | The Kemi integrated mill |
| Q4/2021 | Metsä Board’s Husum integrated mill, the Kyro paperboard mill, Metsä Fibre’s Änekoski bioproduct mill |
The Kemi integrated mill includes Metsä Board's paperboard mill and Metsä Fibre's pulp mill
EVENTS AFTER THE REVIEW PERIOD
On 12 October 2021, the European Commission announced that it was conducting an investigation at Metsä Board Corporation's associated company Metsä Fibre as part of a wider EU-level antitrust investigation of companies active in the wood pulp sector. Metsä Board does not fall under the scope of the investigation.
RESULT GUIDANCE FOR OCTOBER–DECEMBER 2021
Metsä Board's comparable operating result in October–December 2021 is expected to be weaker than in July–September 2021 (EUR 104.0 million).
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METSÄ BOARD CORPORATION
Espoo, Finland, 27 October 2021
BOARD OF DIRECTORS
Further information:
Henri Sederholm, CFO,
tel. +358 10 465 4913
Katri Sundström, VP, Investor Relations,
tel. +358 10 462 0101
A conference call held for investors and analysts will begin at 3 p.m. Conference call participants are requested to dial in and register a few minutes earlier on the following numbers:
Finland: +358 981710310
Sweden: +46 856642651
United Kingdom: +44 3333000804
United States: +1 6319131422
The conference call ID is 31973466#.
The presentation material will be available at www.metsaboard.com/investors and at https://metsaboard.videosync.fi/2021-q3 before the start of the conference call.
Metsä Board's financial reporting and Annual General Meeting in 2022:
10 February 2022: Financial Statements Bulletin for 2021
28 April 2022: Interim Report for January–March 2022
28 July 2022: Half-year Financial Report for January–June 2022
27 October 2022: Interim Report for January–September 2022
24 March 2022: 2022 Annual General Meeting
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CALCULATION OF KEY RATIOS
Operating result = Result before income tax, financial income and expenses, exchange gains and losses share of results from associated companies and joint ventures
EBITDA = Operating result before depreciation, amortisation and impairment losses
Return on equity (%) = (Result before income tax - income taxes) per (Shareholder's equity (average))
Return on capital employed (%) = (Result before income taxes + net exchange differences and other financial expenses) (Balance total + non-interest bearing liabilities (average))
Equity ratio (%) = (Shareholder's equity) per (Balance total - advance payments received)
Net gearing ratio (%) = (Interest-bearing net liabilities) per (Shareholder's equity)
Interest-bearing net liabilities = Interest-bearing liabilities – cash and cash equivalents and interest-bearing receivables
Total investments = Investments in owned and leased fixed assets and investments in business combinations
Earnings per share = (Profit attributable to shareholders of parent company) per (Adjusted number of shares (average))
Shareholders' equity per share = (Equity attributable to shareholders of parent company) per (Adjusted number of shares at the end of the period)
Adjusted average share price = (Total traded volume per share (EUR)) per (Average adjusted number of shares traded during the financial year)
Market capitalisation = (Number of shares) x (market price at the end of period)
COMPARABLE KEY RATIOS
According to the guidelines of the European Securities and Markets Authority (ESMA), alternative performance measures are key figures concerning historical or future financial performance, financial standing or cash flows that are not determined by the financial reporting framework applied by the company. Metsä Board's financial reporting framework consists of the IFRS standards in the form in which they were adopted by the EU in line with Regulation (EC) No. 1606/2002. With the exception of earnings per share, which have been defined in standard IAS 33 (Earnings per Share), the key figures presented in this financial report meet ESMA's criteria for alternative performance measures.
Metsä Board believes that the presentation of alternative performance measures provides users of financial statements with a better understanding of the company's financial performance and standing, including its use of equity, operational profitability and ability to service debt.
The reconciliation of the comparable key figures is presented in this financial report. Metsä Board considers
that the key figures derived in this manner improve the comparability of reporting periods.
None of these key figures with items affecting comparability eliminated are key figures used in IFRS reporting, and they cannot be compared with other companies' key figures identified by the same names. Items affecting comparability include material gains and losses on disposals of assets, impairment and impairment reversals in accordance with IAS 36 "Impairment of Assets", corporate divestments and acquisitions, adjustment measures and other restructuring measures and their adjustments, costs arising from extensive and unforeseeable interruptions in production and the compensation received for them as well as items arising from legal proceedings.
Metsä Board considers comparable key figures to better reflect its operational performance, as they eliminate the effect on the result of items and business transactions arising from outside normal business operations.
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INTERIM FINANCIAL REPORT
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR million | Note | Q3 2021 | Q3 2020 | Q1-Q3 2021 | Q1-Q3 2020 | Q1-Q4 2020 |
|---|---|---|---|---|---|---|
| Sales | 2, 6 | 516.1 | 471.2 | 1,565.6 | 1,416.4 | 1,889.5 |
| Change in stocks of finished goods and work in progress | 12.6 | -1.9 | -2.4 | -9.4 | -38.7 | |
| Other operating income | 2, 6 | 8.7 | 3.7 | 23.0 | 14.6 | 33.3 |
| Material and services | 6 | -376.2 | -311.5 | -1,059.9 | -939.2 | -1,225.4 |
| Employee costs | -50.8 | -47.2 | -161.2 | -144.2 | -196.9 | |
| Share of result of associated company | 6 | 42.8 | 2.4 | 80.9 | -0.2 | -2.4 |
| Depreciation, amortisation and impairment losses | -26.0 | -22.2 | -72.3 | -73.9 | -94.5 | |
| Other operating expenses | -27.7 | -32.0 | -88.7 | -101.4 | -137.5 | |
| Operating result | 2 | 99.4 | 62.5 | 285.0 | 162.7 | 227.3 |
| Share of results of associated companies and joint ventures | 0.0 | 0.0 | 0.1 | -0.1 | -0.1 | |
| Net exchange gains and losses | -0.3 | -1.3 | -1.7 | -3.1 | -3.4 | |
| Other net financial items | 2, 6 | -2.8 | -3.0 | -8.3 | -8.7 | -11.5 |
| Result before income tax | 96.4 | 58.1 | 275.1 | 150.8 | 212.3 | |
| Income taxes | 3 | -11.0 | -11.1 | -39.6 | -30.0 | -42.2 |
| Result for the period | 85.4 | 47.0 | 235.5 | 120.8 | 170.1 |
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| EUR million | Note | Q3 2021 | Q3 2020 | Q1-Q3 2021 | Q1-Q3 2020 | Q1-Q4 2020 |
|---|---|---|---|---|---|---|
| Other comprehensive income | ||||||
| Items that will not be reclassified to profit or loss | ||||||
| Actuarial gains/losses on defined pension plans | -1.7 | 1.9 | 1.3 | 2.4 | -3.7 | |
| Financial assets valued at fair value through other comprehensive income | 8 | 12.6 | -4.5 | 4.0 | -65.5 | -70.3 |
| Share of other comprehensive income of associated company | 0.1 | -0.1 | 0.1 | 0.3 | 0.4 | |
| Income tax relating to items that will not be reclassified | -2.2 | 0.6 | -1.1 | 12.7 | 15.0 | |
| Total | 8.9 | -2.1 | 4.3 | -50.2 | -58.6 | |
| Items that may be reclassified to profit or loss | ||||||
| Cash flow hedges | 9.9 | 3.0 | -5.1 | 0.1 | 17.6 | |
| Translation differences | -1.4 | -6.2 | -1.4 | -9.0 | 6.2 | |
| Share of other comprehensive income of associated company | -0.3 | 0.1 | -3.5 | -0.6 | 0.7 | |
| Income tax relating to components of other comprehensive income | -2.0 | -0.6 | 1.0 | 0.1 | -3.4 | |
| Total | 6.2 | -3.8 | -8.9 | -9.4 | 21.1 | |
| Other comprehensive income, net of tax | 15.1 | -5.9 | -4.6 | -59.5 | -37.5 | |
| Total comprehensive income for the period | 100.5 | 41.1 | 230.9 | 61.3 | 132.6 | |
| Result for the period attributable to | ||||||
| Shareholders of parent company | 79.1 | 47.0 | 223.1 | 120.8 | 170.1 | |
| Non-controlling interests | 6.3 | 12.4 | ||||
| Total | 85.4 | 47.0 | 235.5 | 120.8 | 170.1 | |
| Total comprehensive income for the period attributable to | ||||||
| Shareholders of parent company | 94.7 | 41.1 | 218.8 | 61.3 | 132.6 | |
| Non-controlling interests | 5.7 | 12.2 | ||||
| Total | 100.5 | 41.1 | 230.9 | 61.3 | 132.6 | |
| Earnings per share for result attributable to shareholders of parent company (EUR/share) | 0.22 | 0.13 | 0.63 | 0.34 | 0.48 |
The notes are an integral part of the condensed financial report.
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
| EUR million | Note | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 12.4 | 12.4 | 12.4 | |
| Other intangible assets | 5.1 | 7.3 | 6.7 | |
| Tangible assets | 4 | 879.3 | 780.5 | 824.7 |
| Investments in associated companies and joint ventures | 446.5 | 369.7 | 369.0 | |
| Other investments | 8 | 190.8 | 189.5 | 186.9 |
| Other non-current financial assets | 6, 8 | 16.4 | 16.4 | 10.8 |
| Deferred tax receivables | 2 | 7.6 | 7.1 | 7.5 |
| 1,558.0 | 1,382.8 | 1,417.9 | ||
| Current assets | ||||
| Inventories | 363.6 | 358.7 | 360.0 | |
| Accounts receivable and other receivables | 6, 8 | 374.8 | 310.0 | 310.6 |
| Cash and cash equivalents | 6, 8 | 473.6 | 180.6 | 214.0 |
| 1,211.9 | 849.2 | 884.6 | ||
| Total assets | 2,769.9 | 2,232.0 | 2,302.5 | |
| SHAREHOLDERS’ EQUITY AND LIABILITIES | ||||
| Shareholders’ equity | ||||
| Equity attributable to shareholders of parent company | 1,645.2 | 1,312.0 | 1,383.8 | |
| Non-controlling interests | 137.9 | |||
| Total equity | 1,783.0 | 1,312.0 | 1,383.8 | |
| Non-current liabilities | ||||
| Deferred tax liabilities | 95.9 | 92.3 | 97.5 | |
| Post-employment benefit obligations | 2 | 12.5 | 13.3 | 13.4 |
| Provisions | 5 | 3.1 | 4.2 | 3.7 |
| Borrowings | 8 | 440.7 | 444.7 | 444.8 |
| Other liabilities | 8 | 3.8 | 5.7 | 5.3 |
| 556.1 | 560.2 | 564.7 | ||
| Current liabilities | ||||
| Provisions | 5 | 1.0 | 0.5 | 1.0 |
| Current borrowings | 6, 8 | 10.8 | 16.1 | 7.6 |
| Accounts payable and other liabilities | 6, 8 | 419.1 | 343.3 | 345.4 |
| 430.8 | 359.8 | 354.0 | ||
| Total liabilities | 986.9 | 920.0 | 918.7 | |
| Total shareholders’ equity and liabilities | 2,769.9 | 2,232.0 | 2,302.5 |
The notes are an integral part of the condensed financial report.
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UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| EUR million | Note | Share capital | Translation differences | Fair value and other reserves | Reserve for invested un-restricted equity | Retained earnings | Total | Non-controlling interests | Equity Total |
|---|---|---|---|---|---|---|---|---|---|
| Shareholders' equity, 1 January 2020 | 557.9 | -29.1 | 175.5 | 315.5 | 318.2 | 1,338.0 | 1,338.0 | ||
| Comprehensive income for the period | |||||||||
| Result for the period | 120.8 | 120.8 | 120.8 | ||||||
| Other comprehensive income net of tax total | -11.0 | -50.5 | 1.9 | -59.5 | -59.5 | ||||
| Comprehensive income total | -11.0 | -50.5 | 122.8 | 61.3 | 61.3 | ||||
| Share based payments | -2.0 | -2.0 | -2.0 | ||||||
| Related party transactions | |||||||||
| Dividend and capital distribution | -49.8 | -35.6 | -85.3 | -85.3 | |||||
| Shareholders' equity, 30 September 2020 | 557.9 | -40.1 | 125.0 | 265.8 | 403.4 | 1,312.0 | 1,312.0 | ||
| EUR million | Note | Share capital | Translation differences | Fair value and other reserves | Reserve for invested unrestricted equity | Retained earnings | Total | Non-controlling interests | Equity Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Shareholders' equity, 1 January 2021 | 557.9 | -24.9 | 136.6 | 265.8 | 448.4 | 1,383.8 | 1,383.8 | ||
| Comprehensive income for the period | |||||||||
| Result for the period | 223.1 | 223.1 | 12.4 | 235.5 | |||||
| Other comprehensive income net of tax total | 0.1 | -5.4 | 1.0 | -4.4 | -0.2 | -4.6 | |||
| Comprehensive income total | 0.1 | -5.4 | 224.1 | 218.8 | 12.2 | 230.9 | |||
| Share based payments | 0.6 | 0.6 | 0.6 | ||||||
| Transactions with non-controlling interests | 134.4 | 134.4 | 125.7 | 260.2 | |||||
| Related party transactions | |||||||||
| Dividend and capital distribution | -56.9 | -35.6 | -92.4 | -92.4 | |||||
| Shareholders' equity, 30 September 2021 | 557.9 | -24.8 | 131.2 | 208.9 | 772.0 | 1,645.2 | 137.9 | 1,783.0 |
The notes are an integral part of the condensed financial report.
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UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT
| EUR million | Note | Q1-Q3 | Q1-Q3 | Q1-Q4 | Q3 |
|---|---|---|---|---|---|
| 2021 | 2020 | 2020 | 2021 | ||
| Result for the period | 235.5 | 120.8 | 170.1 | 85.4 | |
| Total adjustments | 7 | 30.6 | 108.8 | 140.6 | -7.7 |
| Change in working capital | -21.3 | -2.1 | 37.9 | -3.1 | |
| Net financial items | 7 | -11.2 | 9.4 | 4.2 | -8.2 |
| Income taxes paid | -23.8 | -10.2 | -45.2 | -7.2 | |
| Net cash flow from operations | 209.8 | 226.7 | 307.7 | 59.1 | |
| Investments in intangible and tangible assets | -130.9 | -113.0 | -154.2 | -35.2 | |
| Disposals and other items | 6, 7 | 14.2 | 8.1 | 12.2 | 5.1 |
| Net cash flow from investing | -116.7 | -105.0 | -142.0 | -30.2 | |
| Changes in non-controlling interests | 7 | 261.2 | |||
| Changes in non-current loans and in other financial items | 6 | -4.1 | 11.6 | 1.0 | -1.3 |
| Paid dividend and capital distribution | -92.4 | -85.3 | -85.3 | ||
| Net cash flow from financing | 164.7 | -73.7 | -84.4 | -1.3 | |
| Changes in cash and cash equivalents | 257.8 | 48.0 | 81.3 | 27.6 | |
| Cash and cash equivalents at beginning of period | 6 | 214.0 | 134.2 | 134.2 | 445.8 |
| Translation difference in cash and cash equivalents | 1.8 | -1.6 | -1.5 | 0.1 | |
| Changes in cash and cash equivalents | 257.8 | 48.0 | 81.3 | 27.6 | |
| Cash and cash equivalents at end of period | 6 | 473.6 | 180.6 | 214.0 | 473.6 |
The notes are an integral part of the condensed financial report.
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NOTES TO THE UNAUDITED FINANCIAL REPORT
NOTE 1 – BACKGROUND AND BASIS OF PREPARATION
Metsä Board Corporation and its subsidiaries comprise a forest industry group whose main product areas are fresh fibre cartonboards and linerboards. Metsä Board Corporation, the parent company, is domiciled in Helsinki and the registered address of the company is Revontulenpuisto 2, 02100 Espoo, Finland. Metsä Board’s ultimate parent company is Metsäliitto Cooperative.
This financial report has been prepared in accordance with IAS 34, Interim Financial Reporting, and it should be read in conjunction with the 2020 IFRS financial statements. The effects of foreign exchange changes on review period operating result vis-à-vis comparison period result have been calculated based on estimated review period net cash flows in relevant currencies and taking into account the realized effects of foreign exchange hedges.
The same accounting policies have been applied as in the 2020 IFRS financial statements with the following exception:
- Depreciation of machinery and equipment during the financial year has been adjusted between the quarters when applicable in order to correspond with the distribution of the economic benefit of the asset between quarters.
- The amendments to the standards that came into force at the beginning of 2021 do not have a material effect on the Group's financial report.
- The impact of the coronavirus on Metsä Board's business is described in more detail in the explanatory part of this financial report.
- All amounts in the financial report are presented in millions of euros, unless otherwise stated.
- This financial report was authorised for issue by the Board of Directors of Metsä Board on 27 October 2021.
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NOTE 2 – SEGMENT INFORMATION
The Corporate Management Team is the chief operational decision-maker monitoring business operations performance based on the operating segments. Metsä Board's business operations consist solely of folding boxboard, fresh fibre linerboard and market pulp businesses. Metsä Board reports on its financial performance in one reporting segment.
GEOGRAPHICAL DISTRIBUTION OF SALES
| EUR million | Q3 2021 | Q3 2020 | Q1-Q3 2021 | Q1-Q3 2020 | Q1–Q4 2020 |
|---|---|---|---|---|---|
| EMEA | 349.7 | 320.6 | 1,046.9 | 967.6 | 1,281.8 |
| Americas | 119.0 | 114.0 | 366.8 | 332.7 | 440.7 |
| APAC | 47.4 | 36.6 | 152.0 | 116.1 | 167.0 |
| Total | 516.1 | 471.2 | 1,565.6 | 1,416.4 | 1,889.5 |
RECONCILIATION OF ITEMS AFFECTING COMPARABILITY
| EUR million | Q3 2021 | Q3 2020 | Q1-Q3 2021 | Q1-Q3 2020 | Q1–Q4 2020 |
|---|---|---|---|---|---|
| Operating result | 99.4 | 62.5 | 285.0 | 162.7 | 227.3 |
| Depreciation, amortisation and impairment losses | 26.0 | 22.2 | 72.3 | 73.9 | 94.5 |
| EBITDA | 125.4 | 84.7 | 357.4 | 236.6 | 321.8 |
| Items affecting comparability: | |||||
| Other operating income | -1.7 | -11.3 | -6.0 | -6.0 | |
| Share of results of associated companies | 6.9 | ||||
| Other operating expense | 1.7 | 10.1 | |||
| Total | 0.0 | 5.7 | -6.0 | -6.0 | |
| EBITDA, comparable | 125.4 | 84.7 | 363.1 | 230.6 | 315.8 |
| Depreciation, amortisation and impairment losses | -26.0 | -22.2 | -72.3 | -73.9 | -94.5 |
| Items affecting comparability: | |||||
| Impairment charges and reversals of impairments | 4.6 | 4.6 | |||
| Operating result, comparable | 104.0 | 62.5 | 295.3 | 156.7 | 221.2 |
| Share of results of associated companies and joint ventures | 0.0 | 0.0 | 0.1 | -0.1 | -0.1 |
| Net financial items | -3.1 | -4.3 | -10.0 | -11.8 | -14.9 |
| Result before income tax, comparable | 100.9 | 58.1 | 285.4 | 144.8 | 206.3 |
| Income taxes | -11.0 | -11.1 | -39.6 | -30.0 | -42.2 |
| Income taxes related to items affecting comparability | -0.9 | -0.7 | 1.2 | 1.2 | |
| Result for the period, comparable | 89.0 | 47.0 | 245.0 | 116.0 | 165.3 |
“+” sign items = expense affecting comparability
“-” sign items = income affecting comparability
Items affecting operating result comparability in 2021 totalled EUR -10.3 million and comprised disposal gains from sold non-business related land area EUR 7.0 million, impairment recognised in the assets of the associate company Metsä Fibre’s Kemi pulp mill
EUR -6.9 million, EUR -5.8 million in costs related to the fire of chip conveyor at the Husum pulp mill and impairment recognised in the assets of the Husum current board production EUR -4.6 million.
Items affecting comparability in 2020 totalled EUR 6.0 million and comprised disposal gains from sold non-business related land area.
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NOTE 3 – INCOME TAXES
| EUR million | Q1-Q3 | Q1-Q3 | Q1-Q4 |
|---|---|---|---|
| 2021 | 2020 | 2020 | |
| Taxes for the current period | 40.1 | 29.1 | 41.8 |
| Taxes for the prior periods | 0.9 | 0.0 | 0.2 |
| Change in deferred taxes | -1.4 | 0.9 | 0.2 |
| Total income taxes | 39.6 | 30.0 | 42.2 |
NOTE 4 – CHANGES IN PROPERTY, PLANT AND EQUIPMENT
| EUR million | Q1-Q3 | Q1-Q3 | Q1-Q4 |
|---|---|---|---|
| 2021 | 2020 | 2020 | |
| Carrying value at beginning of period | 824.7 | 742.0 | 742.0 |
| Investments to owned property, plant and equipment | 130.7 | 112.9 | 161.1 |
| Investments to leased property, plant and equipment | 2.9 | 4.5 | 4.5 |
| Decreases | -2.7 | -2.5 | -2.4 |
| Depreciation, amortization and impairment losses | -70.7 | -72.3 | -92.4 |
| Translation difference | -5.6 | -4.0 | 11.9 |
| Carrying value at end of the period | 879.3 | 780.5 | 824.7 |
In 2021 there were an impairment loss of EUR -4.6 million recognised in the current paperboard production assets in Husum, which the company plans to replace in the investment increasing the mill's folding boxboard capacity.
NOTE 5 – PROVISIONS
| EUR million | Restructuring | Environmental obligations | Other provisions | Total |
|---|---|---|---|---|
| 1 January 2021 | 0.2 | 3.4 | 1.0 | 4.7 |
| Translation differences | 0.0 | 0.0 | 0.0 | |
| Additions | 0.0 | 0.0 | ||
| Utilised during the year | -0.6 | -0.6 | ||
| 30 September 2021 | 0.2 | 2.8 | 1.0 | 4.1 |
| Non-Current Provisions | 2.1 | 1.0 | 3.1 | |
| Current Provisions | 0.2 | 0.8 | 0.0 | 1.0 |
| Total | 0.2 | 2.8 | 1.0 | 4.1 |
Half of non-current provisions are estimated to be utilised by the end of 2025 and the rest in 2030s.
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NOTE 6 – RELATED PARTY TRANSACTIONS
Related parties include Metsä Board's ultimate parent company Finnish Metsäliitto Cooperative, other subsidiaries of Metsäliitto, associated companies and joint ventures. The members of The Board of Directors and Metsä Group's Executive Management Team and Metsä Board's Corporate Management Team as well as their close family members are also included in related parties.
Metsä Board enters into a significant number of transactions with related parties for the purchases of inventories, sale of goods, corporate services as well as financial transactions. Arm's length pricing has been followed in product and service transactions undertaken and interest rates set between Metsä Board and the related parties.
Transactions with parent and sister companies
| EUR million | Q1-Q3 2021 | Q1-Q3 2020 | Q1-Q4 2020 |
|---|---|---|---|
| Sales | 73.5 | 57.6 | 75.4 |
| Other operating income | 3.6 | 3.3 | 4.0 |
| Purchases | 510.9 | 449.5 | 598.7 |
| Share of result from associated company | 80.9 | -0.2 | -2.4 |
| Interest income | 0.0 | 0.0 | 0.1 |
| Interest expenses | 0.8 | 0.7 | 0.9 |
| Accounts receivable and other receivables | 58.5 | 31.4 | 50.2 |
| Cash and cash equivalents | 461.1 | 171.0 | 204.7 |
| Accounts payable and other liabilities | 69.6 | 53.4 | 54.8 |
Metsä Fibre's net result is included within operating result line item "Share of result from associated company" and transactions with Metsä Fibre are included in transactions with sister companies.
Metsä Fibre paid a dividend of EUR 0.0 million to Metsä Board in the review period (21.8).
Cash and cash equivalents include interest-bearing receivables comparable to cash funds and available from Metsä Group's internal bank Metsä Group Treasury Oy.
Transactions with associated companies and joint ventures
| EUR million | Q1-Q3 2021 | Q1-Q3 2020 | Q1-Q4 2020 |
|---|---|---|---|
| Sales | 0.4 | 0.4 | 0.5 |
| Purchases | 3.1 | 2.2 | 3.0 |
| Other non-current financial assets | |||
| Accounts receivable and other receivables | 0.0 | 0.0 | 0.2 |
| Accounts payable and other liabilities | 0.9 | 0.6 | 0.6 |
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NOTE 7 – NOTES TO CONSOLIDATED CASH FLOW STATEMENT
ADJUSTMENTS TO THE RESULT FOR THE PERIOD
| EUR million | Q1-Q3 | Q1-Q3 | Q1-Q4 | Q3 |
|---|---|---|---|---|
| 2021 | 2020 | 2020 | 2021 | |
| Taxes | 39.6 | 30.0 | 42.2 | 11.0 |
| Depreciation, amortization and impairment charges | 72.3 | 73.9 | 94.5 | 26.0 |
| Share of result from associated companies and joint ventures | -80.9 | 0.3 | 2.5 | -42.8 |
| Gains and losses on sale of fixed assets | -12.2 | -7.3 | -14.0 | -5.1 |
| Finance costs, net | 10.0 | 11.8 | 14.9 | 3.1 |
| Pension liabilities and provisions | -0.9 | -0.8 | -1.0 | -0.7 |
| Other adjustments | 2.7 | 0.9 | 1.5 | 0.8 |
| Total | 30.6 | 108.8 | 140.6 | -7.7 |
Net financial items
Net financial items in consolidated cash flow statement include a dividend of EUR 0.0 million paid by Metsä Fibre (21.8).
Disposals and other items
Disposals and other items reported in 2021 were EUR 14.2 million in total. They consisted of sales proceeds of EUR 8.7 million from sale of non-business related land area, proceeds amounting to EUR 5.0 million from emission right sales as well as other sale proceeds and other items amounting to EUR 0.4 million.
Disposals and other items in 2020 were EUR 12.2 million in total. They consisted of sales proceeds of EUR 7.1 million from sale of non-business related land area, proceeds amounting to EUR 6.2 million from emission right sales, investment in Pohjolan Voima Ltd EUR -2.2 million as well as other sale proceeds and other items amounting to EUR 1.1 million.
Changes in non-controlling interests
In 2021, changes in non-controlling interests, EUR 261.2 million, include the sale of a 30 percent stake in the Husum pulp mill to Norra Skog. The transaction was completed on January 4, 2021.
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NOTE 8 – FINANCIAL INSTRUMENTS
Classification of financial assets and liabilities and their fair values
Financial assets 30 September 2021
| EUR million | Fair value through profit and loss | Fair value through other comprehensive income | Amortised cost | Total carrying amount |
|---|---|---|---|---|
| Other non-current investments | 3.4 | 187.4 | 190.8 | |
| Other non-current financial assets | 11.9 | 11.9 | ||
| Accounts receivable and other receivables | 338.6 | 338.6 | ||
| Cash and cash equivalent | 0.0 | 473.6 | 473.6 | |
| Derivative financial instruments | 0.2 | 35.7 | 35.9 | |
| Total carrying amount | 3.6 | 223.1 | 824.0 | 1,050.8 |
| Total fair value | 3.6 | 223.1 | 824.0 | 1,050.7 |
Financial liabilities 30 September 2021
| EUR million | Fair value through profit and loss | Fair value through other comprehensive income | Amortised cost | Total carrying amount |
|---|---|---|---|---|
| Non-current interest-bearing financial liabilities | 440.7 | 440.7 | ||
| Other non-current financial liabilities | 0.4 | 0.4 | ||
| Current interest-bearing financial liabilities | 10.8 | 10.8 | ||
| Accounts payable and other financial liabilities | 353.4 | 353.4 | ||
| Derivative financial instruments | 1.0 | 16.3 | 17.3 | |
| Total carrying amount | 1.0 | 16.3 | 805.2 | 822.5 |
| Total fair value | 1.0 | 16.3 | 836.2 | 853.5 |
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Classification of financial assets and liabilities and their fair values
Financial assets 30 September 2020
| EUR million | Fair value through profit and loss | Fair value through other comprehensive income | Amortised cost | Total carrying amount |
|---|---|---|---|---|
| Other non-current investments | 3.5 | 186.0 | 189.5 | |
| Other non-current financial assets | 16.1 | 16.1 | ||
| Accounts receivable and other receivables | 291.9 | 291.9 | ||
| Cash and cash equivalent | 0.0 | 180.6 | 180.6 | |
| Derivative financial instruments | 1.1 | 17.1 | 18.2 | |
| Total carrying amount | 4.6 | 203.1 | 488.5 | 696.2 |
| Total fair value | 4.6 | 203.1 | 488.5 | 696.2 |
Financial liabilities 30 September 2020
| EUR million | Fair value through profit and loss | Fair value through other comprehensive income | Amortised cost | Total carrying amount |
|---|---|---|---|---|
| Non-current interest-bearing financial liabilities | 444.7 | 444.7 | ||
| Other non-current financial liabilities | 0.3 | 0.3 | ||
| Current interest-bearing financial liabilities | 16.1 | 16.1 | ||
| Accounts payable and other financial liabilities | 287.2 | 287.2 | ||
| Derivative financial instruments | 0.7 | 9.4 | 10.0 | |
| Total carrying amount | 0.7 | 9.4 | 748.2 | 758.2 |
| Total fair value | 0.7 | 9.4 | 772.7 | 782.8 |
Accounts receivable and other receivables do not include advance payments, accrued tax receivables and periodisations of employee costs.
Accounts payable and other financial liabilities do not include advance payments, accrued tax liabilities and periodisations of employee costs.
In Metsä Board, all interest-bearing liabilities are valued in the balance sheet at amortised cost based on effective interest method.
Fair values in the table are based on present value of cash flow of each liability or assets calculated by market rate. The discount rates applied are between 0.3–1.0% (0.3–2.2). The fair values of accounts and other receivables and accounts payable and other liabilities do not materially deviate from their carrying amounts in the balance sheet.
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Fair value hierarchy of financial assets and liabilities as of 30 September 2021
| EUR million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at fair value | ||||
| Other non-current investments | 0.0 | 190.8 | 190.8 | |
| Derivative financial assets | 12.0 | 24.0 | 35.9 | |
| Financial liabilities measured at fair value | ||||
| Derivative financial liabilities | 0.3 | 17.0 | 17.3 | |
| Financial assets not measured at fair value | ||||
| Cash and cash equivalent | 473.5 | 473.5 | ||
| Financial liabilities not measured at fair value | ||||
| Non-current interest-bearing financial liabilities | 471.7 | 471.7 | ||
| Current interest-bearing financial liabilities | 10.8 | 10.8 |
Fair value hierarchy of financial assets and liabilities as of 30 September 2020
| EUR million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at fair value | ||||
| Other non-current investments | 0.0 | 189.5 | 189.5 | |
| Derivative financial assets | 1.5 | 16.8 | 18.2 | |
| Financial liabilities measured at fair value | ||||
| Derivative financial liabilities | 1.8 | 8.2 | 10.0 | |
| Financial assets not measured at fair value | 180.5 | 180.5 | ||
| Cash and cash equivalent | ||||
| Financial liabilities not measured at fair value | ||||
| Non-current interest-bearing financial liabilities | 469.2 | 469.2 | ||
| Current interest-bearing financial liabilities | 16.1 | 16.1 |
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Other non-current investments at fair value based on Level 3
| EUR million | Q1-Q3 2021 | Q1-Q3 2020 | Q1-Q4 2020 |
|---|---|---|---|
| Carrying value at beginning of period | 186.9 | 255.1 | 255.1 |
| Total gains and losses in profit or loss | -0.1 | -0.1 | -0.1 |
| Total gains and losses in other comprehensive income | 4.0 | -65.5 | -70.3 |
| Purchases | 2.2 | ||
| Disposals | 0.0 | -0.1 | -0.1 |
| Carrying value at end of the period | 190.8 | 189.5 | 186.9 |
Financial assets and liabilities measured at fair value have been categorised according to IFRS 7 Financial Instruments: Disclosures.
Level 1
Fair value is based on quoted prices in active markets.
Level 2
Fair value is determined by using valuation techniques that use observable price information from market.
Level 3
Fair value are not based on observable market data, but company's own assumptions.
The fair values of electricity, natural gas, propane, fuel oil derivatives are determined by using public price quotations in an active market (Level 1).
The fair values of currency forwards and options are determined by using the market prices of the closing date of the reporting period. The fair values of interest rate swaps are determined by using the present value of expected payments, discounted using a risk adjusted discount rate, supported by market interest rates and other market data of the closing date of the reporting period (Level 2).
For financial instruments not traded on an active market, the fair value is determined by valuation techniques. Judgment is used when choosing the different techniques and making assumptions, which are mainly
based on circumstances prevailing in the markets on each closing date of the reporting period (Level 3).
The valuation techniques are described in more detail in the Annual report.
The most significant asset at fair value not traded on an active market is the investment in Pohjolan Voima Oyj shares classified as a financial asset at fair value through other comprehensive income. The value of investment is determined based on the present value of discounted cash flows.
The WACC used in Pohjolan Voima Oyj share valuation on 30 September 2021 was 3.26% (31 December 2020: 2.87) and 4.26% (3.87) for the Olkiluoto 3 power plant under construction. The acquisition cost of shares in Pohjolan Voima Oyj on 30 September 2021 is EUR 40.2 million (40.2) and fair value EUR 187.4 million (183.4).
The carrying value of other investments as of 30 September 2021 is estimated to change by EUR -8.3 million and EUR 9.0 million should the rate used for discounting the cash flows change by 0.5 percentage points from the rate estimated by the management. The carrying value of other investments is estimated to change by EUR 87.6 million should the energy prices used in calculating the fair value differ by 10% from the prices estimated by the management.
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Derivatives 30 September 2021
| EUR million | Nominal value | Fair value | Fair value | |||
|---|---|---|---|---|---|---|
| Interest rate swaps | 100.0 | Derivative Assets | Liab. | Fair value Net | Fair value through profit and loss | Fair value through other comprehensive income |
| 2.3 | -2.3 | -2.3 | ||||
| Interest rate derivatives | 100.0 | 2.3 | -2.3 | -2.3 | ||
| Currency forward contracts | 1,066.9 | 1.6 | 14.6 | -13.0 | -0.9 | -12.1 |
| Currency derivatives | 1,066.9 | 1.6 | 14.6 | -13.0 | -0.9 | -12.1 |
| Electricity derivatives | 5.5 | 5.2 | 5.2 | 5.2 | ||
| Oil derivatives | 17.9 | 5.2 | 0.3 | 5.0 | 5.0 | |
| Other commodity derivatives | 16.0 | 23.9 | 0.1 | 23.8 | 23.8 | |
| Commodity derivatives | 39.3 | 34.3 | 0.4 | 33.9 | 33.9 | |
| Derivatives total | 1,206.2 | 35.9 | 17.3 | 18.6 | -0.9 | 19.5 |
Derivatives 30 September 2020
| EUR million | Nominal value | Fair value | Fair value | |||
|---|---|---|---|---|---|---|
| Interest rate swaps | 100.0 | Derivative Assets | Liab. | Fair value Net | Fair value through profit and loss | Fair value through other comprehensive income Assets |
| 3.5 | -3.5 | -3.5 | ||||
| Interest rate derivatives | 100.0 | 3.5 | -3.5 | -3.5 | ||
| Currency forward contracts | 890.0 | 16.4 | 4.3 | 12.1 | 0.4 | 11.7 |
| Currency derivatives | 890.0 | 16.4 | 4.3 | 12.1 | 0.4 | 11.7 |
| Electricity derivatives | 12.4 | 1.0 | 0.4 | 0.5 | 0.5 | |
| Oil derivatives | 14.4 | 0.4 | 1.2 | -0.8 | -0.8 | |
| Other commodity derivatives | 9.3 | 0.4 | 0.5 | -0.1 | -0.1 | |
| Commodity derivatives | 36.1 | 1.8 | 2.2 | -0.4 | -0.4 | |
| Derivatives total | 1,026.1 | 18.2 | 10.0 | 8.2 | 0.4 | 7.8 |
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NOTE 9 – COMMITMENTS AND GUARANTEES
| EUR million | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|
| Liabilities secured by collateral | 7.8 | ||
| Pledges granted | 130.7 | ||
| Real estate mortgages | 232.8 | 192.8 | |
| Total pledges and mortgages | 363.5 | 192.8 | |
| Guarantees and counter-indemnities | 1.7 | 2.8 | 2.8 |
| Commitments on behalf of associated companies and joint ventures | 0.1 | 0.1 | 0.1 |
| Total | 1.8 | 366.4 | 195.7 |
COMMITMENTS RELATED TO PROPERTY, PLANT AND EQUIPMENT
| EUR million | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|
| Payments due in following 12 months | 70.4 | 29.4 | 60.4 |
| Payments due later | 2.4 | ||
| Total | 72.8 | 29.4 | 60.4 |
Commitments related to property, plant and equipment concern mainly the first phase of the modernisation of the Husum pulp mill and an investment to increase Husum's folding boxboard capacity.
NOTE 10 – EVENTS AFTER THE REVIEW PERIOD
The European Commission announced on 12 October 2021 that it was conducting an inspection on Metsä Board Corporation’s affiliated company Metsä Fibre under EU antitrust rules as part of larger investigation of the market for the wood pulp sector. Metsä Board is not subject to investigation.