Metsä Board Oyj — Interim / Quarterly Report 2021

Jul 28, 2021

Metsä Board’s comparable operating result in January–June 2021 was EUR 191 million

Metsä Board’s comparable operating result in January–June 2021 was EUR 191 million

Metsä Board Corporation Half-year financial report 28 July 2021 at noon 12:00
EEST

January–June 2021 (compared with 1–6/2020)

• Sales were EUR 1,049.5 million (945.2).

• Comparable operating result was EUR 191.3 million (94.2) or 18.2% (10.0) of
sales. Operating result was EUR 185.6 million (100.3).

• Comparable earnings per share were EUR 0.42 (0.19), and earnings per share
were EUR 0.41 (0.21).

• Comparable return on capital employed was 19.3% (10.7).

• Net cash flow from operations was EUR 150.7 mil-lion (152.3).

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.
At the same time, the pandemic has weakened demand for the packaging materials
of luxury items and graphic end uses.

While no chains of coronavirus transmissions have occurred, the incidence of
individual cases of infection has increased as the pandemic has progressed.
During the summer, the number of infections has declined in several of Metsä
Board’s operating units.

Metsä Board’s financial position is 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 substantial precautionary measures aiming to
ensure the health of employees and the continuity of business operations and
prevent the virus from spreading. Despite the precautionary measures, a
prolonged pandemic could lead to disruptions in production and/or the supply
chain.

Events in April–June 2021

• Demand for Metsä Board’s fresh fibre paperboards remained strong in all market
areas important for the company. The delivery volumes of paperboards were again
at a record high.

• In addition to strong paperboard sales, profitability was improved by the
rapidly rising average prices of market pulp.

• The fire that broke out on 18 June 2021 on the chip conveyor of the Husum pulp
mill closed Husum’s pulp production for four weeks. Paperboard production was
run at lower-than-normal capacity during the pulp mill’s shutdown.

• Metsä Board achieved again the highest level, Platinum, in
EcoVadis’s sustainability and social responsibility evaluation. Metsä Board is
among the top 1% in the category of paper, paperboard and packaging
manufacturers.

• Henri Sederholm was appointed Metsä Board’s CFO as of 1 May 2021, while Jussi
Noponen was appointed SVP, Sales and Supply Chain. Sari Pajari-Sederholm,
previously Metsä Board’s SVP, Sales and Marketing, was appointed Metsä Group’s
EVP, Strategy.

Events after the review period

Metsä Board has made an investment decision on 27 July 2021 to increase the
annual folding boxboard capacity by 200,000 tonnes at its Husum integrated mill
in Sweden. The investment value is approximately EUR 210 million and it will be
financed with current cash funds and 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, to be
achieved in full in 2026.

Result guidance for July–September 2021

Metsä Board’s comparable operating result in July–September 2021 is expected to
be roughly at the same level as in April–June 2021 (EUR 102.5 million).

Near-term outlook

The duration of the coronavirus pandemic and its impact on the world economy and
on Metsä Board’s business operations continue to be difficult to estimate.

Demand for paperboards continues to be strong in the company's main market areas
in Europe and North America, and the paperboard order books are at a high level.

The delivery volumes of Metsä Board’s paperboards in July–September are expected
to decline from the record high delivery volumes in April–June and
January–March. The decline is partly due to the fire of the Husum pulp  mill’s
chip conveyor in June, which resulted in production losses of some 26,000 tonnes
in paperboard and 55,000 tonnes in pulp. Market pulp deliveries are also
expected to decline.

The average prices of folding boxboard and white kraftliners in local currencies
are expected to improve in July–September, compared to the average prices in
April–June.

After the rapid rise during the early part of the year, market pulp prices have
stabilised in Europe and taken a downward turn in China. Demand for market pulp
in China has reduced due both to normal seasonal variation and the production
curtailments of some paper paperboard producers. In Europe, the demand situation
has remained good. Profitability of the associated company Metsä Fibre is also
supported by the strong sawn timber business. The container shortage,
particularly between Europe and Asia, continues and affects the deliveries of
market pulp producers.

More planned annual maintenance shutdowns of mills are set to take place in
July–September than in April–June.

The cost inflation will continue during the second half of the year. Metsä Board
estimates that the cost inflation for the full year of 2021 will be 3–4%,
compared to 2020.

Exchange rate fluctuations in July–September 2021, accounting for the effect of
hedges, will have a negative impact on the operating result compared to
April–June 2021, and a clearly negative impact on the operating result compared
to July–September 2020.

METSÄ BOARD’S CEO MIKA JOUKIO:

“The year 2021 has been very good for Metsä Board. Demand for our fresh fibre
paperboards has been strong in all our products and in all our main markets.
Sales prices have risen during the first half of the year and we see the same
trend continuing in the third quarter. The order books for paperboards remain at
an exceptionally high level, which also supports the outlook for the rest of the
year.

The delivery volumes of folding boxboard and white kraftliners were again record
high in April–June, totalling 514,000 tonnes. Our comparable operating result
was excellent, EUR 102.5 million (4–6/2020: EUR 60.5 million). Cash flow during
the second quarter was also strong, EUR 134 million, and at the end of the
period we were nearly free of net debt.

Our comparable operating result in January–June 2021 was EUR 191.3 million
(1–6/2020: 94.2). Our profitability improved due to the rapid rise in market
pulp prices and record-high paperboard volumes. The comparison period was
weakened by the paper industry strike in Finland, which had an approximately EUR
20 million negative impact on the result.

Cost inflation has accelerated during the year, raising the price level of
energy and some chemicals, among other things. Logistics costs have also
increased and shortage of containers in the traffic between Europe and Asia
continues to affect deliveries, particularly in market pulp.

The fire which broke out on the chip conveyor of the Husum pulp mill in late
June resulted in significant production losses for us, in both market pulp and
paperboards. This will have an impact on third quarter sales. The damage caused
by the fire has been repaired, and Husum’s paperboard and market pulp production
are now running at normal capacity.

Our strong financial position, combined with the growing demand for sustainably
produced packaging materials that supports the circular economy, provides us
with an excellent starting point for growing and developing our paperboard
business. After the review period, we made an investment decision to increase
our folding boxboard capacity by 200,000 tonnes at our Husum mill in Sweden. The
investment will bring to market the additional capacity that customers want and
strengthens our position as Europe’s leading producer of folding boxboard. In
addition, we have earlier launched a development programme for the Kemi
paperboard mill, which will increase the annual production capacity of white
kraftliners by 40,000 tonnes and significantly improve the mill’s water and
energy use.

In May, we launched a new 360 Service approach, which will benefit our customers
throughout the packaging value chain – from recyclability to a brand’s impact as
well as the efficiency of production and the supply chain, and the reduction of
environmental impacts. The virtual customer workshops held by our Excellence
Centre continued, focusing, among other things, on testing pharmaceutical
packaging under extreme conditions.

During the review period, we again achieved the highest level, Platinum, in
EcoVadis’s sustainability and social responsibility evaluation. This puts us
among the top 1% in the category of paper, paperboard and packaging
manufacturers. Our ambition is to be a forerunner in sustainability, and we aim
for entirely fossil free production and products by 2030.”

Key figures

                          2021  2020   2021    2021    2020   2020 Q1–Q4
                            Q2   Q2     Q1     Q1–Q2   Q1–Q2

Sales, EUR million 555.8 473.1 493.7 1,049.5 945.2 1,889.5
EBITDA, EUR million 126.3 92.6 105.6 231.9 151.9 321.8
  comparable, EUR million 125.2 86.6 112.5 237.6 145.9 315.8
EBITDA, % of sales 22.7 19.6 21.4 22.1 16.1 17.0
  comparable, % of sales 22.5 18.3 22.8 22.6 15.4 16.7
Operating result, EUR 103.7 66.5 82.0 185.6 100.3 227.3
million
  comparable, EUR million 102.5 60.5 88.8 191.3 94.2 221.2
Operating result, % of 18.6 14.1 16.6 17.7 10.6 12.0
sales
  comparable, % of sales 18.4 12.8 18.0 18.2 10.0 11.7
Result before taxes, EUR 99.8 63.9 78.9 178.7 92.7 212.3
million
  comparable, EUR million 98.7 57.8 85.7 184.4 86.7 206.3
Result for the period, 85.9 51.7 64.2 150.1 73.8 170.1
EUR million
  comparable, EUR million 84.9 46.9 71.1 156.0 69.0 165.3
Earnings per share, EUR 0.23 0.15 0.18 0.41 0.21 0.48
  comparable, EUR 0.22 0.13 0.20 0.42 0.19 0.46
Return on equity, % 21.1 16.0 17.3 19.6 11.3 12.5
  comparable, % 20.8 14.5 19.2 20.4 10.6 12.1
Return on capital 19.9 15.3 16.9 18.7 11.4 12.6
employed, %
  comparable, % 19.7 13.9 18.3 19.3 10.7 12.2
Equity ratio, % 63 58 60 63 58 60
Net gearing, % 0 24 0 0 24 17
Interest-bearing net 0.0 1.1 0.0 0.0 1.1 0.7
liabilities/comparable
EBITDA
Shareholders’ equity per 4.36 3.57 4.09 4.36 3.57 3.89
share, EUR
Interest-bearing net 3.7 305.5 -6.6 3.7 305.5 235.5
liabilities, EUR million
Total investment, EUR 63.4 43.3 35.0 98.3 73.1 166.4
million
Net cash flow from 134.0 72.3 16.8 150.7 152.3 307.7
operations, EUR million
Personnel 2,623 2,662 2,390 2,623 2,662 2,370

METSÄ BOARD CORPORATION

Further information:

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

A conference call held for investors and analysts in English 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 81500946#.

Metsä Board
www.metsaboard.com (https://www.metsaboard.com/Pages/default.aspx)
Metsä Board is a leading European producer of premium fresh fibre paperboards.
We focus on lightweight and high-quality folding boxboards, food service boards
and white kraftliners. The pure fresh fibres we use in our products are a
renewable resource, traceable to origin in sustainably managed northern forests.
We are a forerunner in sustainability, and  we aim for completely fossil free
mills and raw materials by 2030.
Together with our customers we develop innovative packaging solutions to create
better consumer experiences with less environmental impact. In 2020, our sales
totalled EUR 1.9 billion, and we have about 2,400 employees. Metsä Board, part
of Metsä Group, is listed on the Nasdaq Helsinki
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