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Metsä Board Oyj Interim / Quarterly Report 2021
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Interim / Quarterly Report
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METSÄ BOARD
HALF-YEAR FINANCIAL REPORT
JANUARY–JUNE 2021
Metsä
Metsä
Half-year financial report 1 January–30 June 2021
28 July 2021 at 12:00 noon EEST
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METSÄ BOARD'S COMPARABLE OPERATING RESULT IN JANUARY–JUNE 2021 WAS EUR 191 MILLION
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 million (152.3).
APRIL–JUNE 2021
(compared with 4–6/2020)
- Sales were EUR 555.8 million (473.1).
- Comparable operating result was EUR 102.5 million (60.5), or 18.4% (12.8) of sales. Operating result was EUR 103.7 million (66.5).
- Comparable earnings per share were EUR 0.22 (0.13), and earnings per share were EUR 0.23 (0.15).
- Comparable return on capital employed was 19.7% (13.9).
- Net cash flow from operations was EUR 134.0 million (72.3).
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
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Half-year financial report 1 January–30 June 2021
28 July 2021 at 12:00 noon EEST
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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).
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."
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KEY FIGURES
| 2021 Q2 | 2020 Q2 | 2021 Q1 | 2021 Q1–Q2 | 2020 Q1–Q2 | 2020 Q1–Q4 | |
|---|---|---|---|---|---|---|
| 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 million | 103.7 | 66.5 | 82.0 | 185.6 | 100.3 | 227.3 |
| comparable, EUR million | 102.5 | 60.5 | 88.8 | 191.3 | 94.2 | 221.2 |
| Operating result, % of sales | 18.6 | 14.1 | 16.6 | 17.7 | 10.6 | 12.0 |
| comparable, % of sales | 18.4 | 12.8 | 18.0 | 18.2 | 10.0 | 11.7 |
| Result before taxes, EUR million | 99.8 | 63.9 | 78.9 | 178.7 | 92.7 | 212.3 |
| comparable, EUR million | 98.7 | 57.8 | 85.7 | 184.4 | 86.7 | 206.3 |
| Result for the period, EUR million | 85.9 | 51.7 | 64.2 | 150.1 | 73.8 | 170.1 |
| 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 employed, % | 19.9 | 15.3 | 16.9 | 18.7 | 11.4 | 12.6 |
| comparable, % | 19.7 | 13.9 | 18.3 | 19.3 | 10.7 | 12.2 |
| Equity ratio¹), % | 63 | 58 | 60 | 63 | 58 | 60 |
| Net gearing¹), % | 0 | 24 | 0 | 0 | 24 | 17 |
| Interest-bearing net liabilities/comparable EBITDA | 0.0 | 1.1 | 0.0 | 0.0 | 1.1 | 0.7 |
| Shareholders' equity per share¹), EUR | 4.36 | 3.57 | 4.09 | 4.36 | 3.57 | 3.89 |
| Interest-bearing net liabilities¹), EUR million | 3.7 | 305.5 | -6.6 | 3.7 | 305.5 | 235.5 |
| Total investment, EUR million | 63.4 | 43.3 | 35.0 | 98.3 | 73.1 | 166.4 |
| Net cash flow from operations, EUR million | 134.0 | 72.3 | 16.8 | 150.7 | 152.3 | 307.7 |
| Personnel¹) | 2,623 | 2,662 | 2,390 | 2,623 | 2,662 | 2,370 |
¹) At the end of the period
DELIVERY AND PRODUCTION VOLUMES
| 1,000 tonnes | 2021 Q2 | 2021 Q1 | 2020 Q4 | 2020 Q3 | 2020 Q2 | 2021 Q1–Q2 | 2020 Q1–Q2 | 2020 Q1–Q4 |
|---|---|---|---|---|---|---|---|---|
| Delivery volumes | ||||||||
| Folding boxboard | 348 | 329 | 297 | 318 | 310 | 678 | 608 | 1,223 |
| White kraftliner | 166 | 162 | 144 | 143 | 148 | 328 | 300 | 587 |
| Metsä Board's market pulp¹) | 156 | 116 | 158 | 107 | 126 | 272 | 256 | 521 |
| Metsä Fibre's market pulp²) | 185 | 196 | 207 | 168 | 156 | 381 | 321 | 696 |
| Production volumes | ||||||||
| Folding boxboard | 318 | 342 | 317 | 311 | 333 | 660 | 621 | 1,249 |
| White kraftliner | 160 | 164 | 168 | 137 | 156 | 324 | 286 | 591 |
| Metsä Board's pulp¹) | 329 | 362 | 359 | 335 | 348 | 692 | 677 | 1,371 |
| Metsä Fibre's pulp²) | 194 | 186 | 174 | 188 | 193 | 380 | 341 | 702 |
¹) Includes chemical pulp and high-yield pulp (BCTMP)
²) Equal to Metsä Board's 24.9% holding in Metsä Fibre
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Half-year financial report 1 January–30 June 2021
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HALF-YEAR FINANCIAL REPORT
1 January–30 June 2021
SALES AND RESULT
April–June 2021 (compared with 4–6/2020)
Metsä Board's sales totalled EUR 555.8 million (473.1). Folding boxboard accounted for 57% (60) of sales, while 24% (25) of sales came from white kraftliners, 15% (12) from market pulp and 4% (3) from other operations.
Paperboard deliveries were record high, totalling 514,000 tonnes (458,000), of which 66% (69) was delivered to the EMEA region, 28% (26) to the Americas, and 6% (5) to the APAC region. Metsä Board's market pulp deliveries were 156,000 tonnes (126,000).
The comparable operating result of the review period was EUR 102.5 million (60.5), and the operating result was EUR 103.7 million (66.5). Items affecting comparability comprised a EUR 7.0 million capital gain from the sale of a land area not related to business operations and EUR -5.8 million in costs related to the fire of chip conveyor at the Husum pulp mill.
The paper industry strike, which concerned all Metsä Board's mills in Finland and all Metsä Fibre's pulp mills, had a negative impact of around EUR 5 million on the comparable operating result in April–June 2020.
The comparable operating result improved particularly due to the increased average prices of market pulp as well as the increased deliveries of paperboards and market pulp. In addition, the average prices of paperboards in local currencies increased.
The result of the associated company Metsä Fibre accounted for EUR 31.7 million (1.6) of Metsä Board's comparable operating result in April–June.
Comparable operating result in April–June was weakened by cost inflation. Higher electricity prices increased energy costs, in addition to which the prices of some chemicals, such as latex, increased. Personnel expenses were also higher than in the corresponding period the year before.
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 -3.9 million (-2.6), including foreign exchange rate differences from accounts receivable, accounts payable, financial items and the valuation of currency hedging instruments, totalling EUR -1.1 million (0.2).
The result before taxes was EUR 99.8 million (63.9). The comparable result before taxes was EUR 98.7 million (57.8). Income taxes amounted to EUR 13.9 million (12.1).
Earnings per share were EUR 0.23 (0.15). The return on equity was 21.1% (16.0), and the comparable return on equity was 20.8% (14.5). The return on capital employed was 19.9% (15.3), and the comparable return on capital employed was 19.7% (13.9).
January–June 2021 (compared with 1–6/2020)
Metsä Board's sales totalled EUR 1,049.5 million (945.2). Folding boxboard accounted for 57% (59) of
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sales, while 25% (25) of sales came from white kraftliners, 13% (12) from market pulp and 5% (3) from other operations.
Total deliveries of paperboards were 1,005,000 tonnes (908,000), of which 66% (69) was delivered to the EMEA region, 28% (26) to the Americas, and 6% (5) to the APAC region. Metsä Board's market pulp deliveries were 272,000 tonnes (256,000).
The comparable operating result was EUR 191.3 million (94.2), and the operating result was EUR 185.6 million (100.3). The review period's items affecting comparability totalled EUR -5.7 million, and comprised 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; and EUR -5.8 million in costs related to the fire of chip conveyor at the Husum pulp mill.
The paper industry strike, which concerned all Metsä Board's mills in Finland and all Metsä Fibre's pulp mills, had a negative impact of around EUR 20 million on the comparable operating result in January–June 2020.
The review period's comparable operating result was improved particularly by the increased average prices of market pulp and the record-high deliveries of paperboards.
Cost inflation accelerated during the review period. Higher electricity prices, in particular, increased energy costs, in addition to which the prices of some chemicals, such as latex, increased. Logistics and personnel expenses also increased from the comparison period.
Exchange rate fluctuations, including hedges, had a negative impact of around EUR 23 million on the operating result compared to the comparison period.
Metsä Board's share of the comparable operating result of its associated company Metsä Fibre was EUR 44.9 million (-2.6). In addition to the rapid price increase in market pulp, Metsä Fibre's profitability improved by higher demand for sawn timber and increased price levels.
Financial income and expenses totalled EUR -6.9 million (-7.5), including foreign exchange rate differences from accounts receivable, accounts payable, financial items and the valuation of currency hedging instruments, totalling EUR -1.4 million (-1.8).
The result before taxes was EUR 178.7 million (92.7). The comparable result before taxes was EUR 184.4 million (86.7). Income taxes amounted to EUR 28.6 million (18.9).
Earnings per share were EUR 0.41 (0.21). The comparable earnings per share were EUR 0.42 (0.19). The return on equity was 19.6% (11.3), and the comparable return on equity was 20.4% (10.6). The return on capital
employed was 18.7% (11.4), and the comparable return on capital employed was 19.3% (10.7).
The operating result in April–June 2021 in brief (compared with 1–3/2021)
The comparable operating result in April–June was EUR 102.5 million (88.8). The increased average prices of market pulp and paperboards, as well as increased deliveries, improved the operating result. The result of the associated company Metsä Fibre accounted for EUR 31.7 million (13.2) of Metsä Board's comparable operating result in April–June. Profitability was weakened by the planned annual maintenance shutdowns of mills, the increase in the prices of some chemicals and energy, and by higher personnel expenses. Exchange rate fluctuations, including hedges, had a negative impact of around EUR 6 million on the operating result compared to the first quarter of the year.
MARKET DEVELOPMENT
Sources: Fastmarkets FOEX, Fastmarkets RISI, CEPI Cartonboard, CEPI Containerboard, AFPA
April–June 2021 (compared with 4–6/2020)
Deliveries by European folding boxboard producers within Europe increased by 6%, and market prices increased compared to the corresponding quarter in the previous year. Correspondingly, deliveries by producers of white kraftliners increased by 2%, and market prices improved. In the United States, the production of solid bleached boxboard and food service paperboard for local consumption declined and market prices improved.
In Europe, the dollar-denominated market price of long-fibre pulp increased by 41%, calculated from the average prices of quarters. The dollar-denominated market price of short-fibre pulp increased by 48%. In China, the dollar-denominated market price of long-fibre pulp increased by 69% and that of short-fibre pulp by 66%.
January–June 2021 (compared with 1–6/2020)
Deliveries by European folding boxboard producers within Europe increased by 4%, and market prices were stable compared to the corresponding period in the previous year. Correspondingly, deliveries by producers of white kraftliners increased by 5%, and market prices were stable.
Metsä Board's share of the total deliveries by European folding boxboard producers was 35% (34), and 55% (55) of exports from Europe.
In the United States, the production of solid bleached boxboard and food service paperboard for local consumption declined and market prices improved.
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In Europe, the dollar-denominated market price of long-fibre pulp increased by 29% calculated from the average prices of periods. The dollar-denominated market price of short-fibre pulp increased by 31%. In China, the dollar-denominated market price of long-fibre pulp increased by 57% and that of short-fibre pulp by 49%.
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.
Metsä Board's annual total pulp position shows a surplus of around 400,000 tonnes taking into account the minority ownership of the Husum pulp mill. The surplus consists mostly of long-fibre pulp. The company's total pulp position is composed of the difference between Metsä Board's own pulp production and pulp consumption as well as of Metsä Board's 24.9% holding in Metsä Fibre. The company's own pulp production includes a 70% share of the production of the Husum pulp mill, corresponding with Metsä Board's holding. On the level of operating result, the surplus is some 600,000 tonnes, including the whole production of Husum pulp mill.
Paperboard sales January–June 2021 (1–6/2020)
Demand for the packaging of food and pharmaceuticals has been particularly strong during the review period and the entire duration of the coronavirus pandemic, supporting the sales of folding boxboard. Correspondingly, the pandemic has weakened demand for the packaging materials of luxury items and graphic end uses. Demand for coated white kraftliners has been supported by the brisk retail sector and the growth in e-commerce.
Metsä Board's paperboard deliveries in January–June 2021 were record high, totalling 1,005,000 tonnes (908,000). Deliveries of folding boxboard were 677,000 tonnes (608,000), of which 68% (71) was delivered to the EMEA region, 24% (22) to the Americas, and 9% (7) to the APAC region. Deliveries of white kraftliners were 328,000 tonnes (300,000), of which 63% (65) was delivered to the EMEA region, 36% (33) to the Americas, and 1% (2) to the APAC region.
The delivery volumes of paperboard to the EMEA region grew by 6% from the comparison period. The average prices of paperboard declined slightly.
Demand for Metsä Board's paperboards in the Americas region, and particularly in the United States, remained strong. The delivery volumes of paperboards grew by 20% from the comparison period and the dollar-denominated average prices of paperboards improved.
Metsä Board's deliveries to the APAC region consist largely of folding boxboard. The delivery volumes of paperboard grew by 31% from the comparison period.
Market pulp sales January–June 2021 (1–6/2020)
Metsä Board's own market pulp deliveries were 272,000 tonnes (256,000) during the review period.
The associated company Metsä Fibre's total pulp deliveries amounted to 1,530,000 tonnes (1,289,000). 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.
The strong demand for long-fibre pulp during the first half of the year, particularly in China, weakened towards the end of the review period. In Europe, demand for long-fibre pulp was supported particularly by increased consumption of paperboards and higher operating rates of printing paper mills.
Global problems in the availability of containers and the several annual maintenance shutdowns by market pulp producers, which took place during the second quarter, reduced the supply of long-fibre pulp. The prices of market pulp have risen strongly in both China and Europe this year.
Production January–June 2021 (1–6/2020)
The production volume of paperboards during the review period totalled 984,000 tonnes (907,000), while the combined production volume of pulp and high-yield pulp amounted to 692,000 tonnes (677,000).
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.
Some planned annual maintenance shutdowns took place during the second quarter of the year, mainly at the paperboard mills in Finland. Production at Metsä Board's mills and the mills' annual maintenance works have proceeded normally.
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. The fire was caused by a malfunction in an electric device igniting
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the rubber conveyor in the wood chip feeder line. Paperboard production was run at a lower-than-normal capacity following the pulp mill's shutdown. The production losses in pulp attributable to the fire were around 55,000 tonnes, of which some 22,000 tonnes concerned the review period. The loss in paperboard production amounted to roughly 26,000 tonnes, of which some 15,000 concerned the review period.
CASH FLOW
Net cash flow from operations in January–June 2021 was EUR 150.7 million (1–6/2020: 152.3). Working capital increased by EUR 18.2 million (increase of 5.4). Net cash flow from operations in April–June 2021 was particularly strong: EUR 134.0 million (4–6/2020: 72.3). Cash flow during the second quarter was improved by changes in the working capital, such as an increase in accounts payable and a reduction in end-product inventories, attributable to strong demand.
Cash flow during the first quarter is typically affected by a strong growth in working capital, given that the production volumes of mills are at a high level. This did not take place during the comparison period because the paper industry strike curtailed production at all mills in Finland.
BALANCE SHEET AND FINANCING
Metsä Board's equity ratio at the end of the review period was 63% (31 December 2020: 60) and the net gearing ratio was 0% (17). The ratio of net liabilities to comparable EBITDA in the previous 12 months was 0.0 (0.7).
At the end of the review period, interest-bearing liabilities totalled EUR 452.3 million (31 December 2020: 452.4). Non-euro-denominated loans accounted for 1.6% 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 5.2 years (5.7). The interest rate maturity of loans was 47.0 months (52.0).
At the end of the review period, net interest-bearing liabilities totalled EUR 3.7 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 837.6 million (31 December 2020: 605.8), consisting of the following items: liquid assets and investments of EUR 445.8 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 435.3 million consisted of short-term deposits with Metsä Group Treasury, and EUR 10.5 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 178.2 million at the end of the review period (31 December 2020: 186.9). The change in the fair value is related to the decrease in the fair value of Pohjolan Voima Oyj's shares.
At the end of the review period, an average of 7.8 months of the net foreign currency exposure was hedged, including the hedging of the balance sheet position of accounts receivable and accounts payable (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 98.3 million (1–6/2020: 73.1), of which investments in own property, plant and equipment were EUR 95.8 million (70.0) and investments in leased property, plant and equipment were EUR 2.5 million (3.1). Maintenance investments and development investments account for approximately 18% and 82%, 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. The investments made in the project by the end of the review period totalled approximately EUR 198 million.
According to estimates, the new recovery boiler and turbine will be taken into use during the first half of 2022. 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
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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 promote a shift towards fossil free mills.
Development programme of the Kemi paperboard mill
During the first half 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 2030 sustainability targets set by the company.
Folding boxboard capacity increase in Husum
After the review period on 27 July 2021, Metsä Board made an investment decision to increase the annual folding boxboard capacity by 200,000 tonnes at its Husum integrated mill in Sweden. After the investment, the annual folding boxboard capacity of the paperboard machine BM1 will increase to 600,000 tonnes. Additional capacity will enter the market during 2024–2025.
The investment value is approximately EUR 210 million, divided in 2021–2024 and mainly in 2022–2023. The investment will be financed with current cash funds and future cash flows from operating activities.
The investment will increase Metsä Board's annual sales by approximately EUR 200 million. In addition, the investment is estimated to have a positive impact of approximately EUR 50 million on the company's annual comparable EBITDA. Sales growth and EBITDA improvement are expected to be achieved in full in 2026.
The Husum port concept will be examined separately, taking into account the growing logistics volumes of the entire integrated mill, and the necessary potential investments will be decided later.
Associated company Metsä Fibre's Kemi bioproduct mill
The Kemi bioproduct mill of Metsä Board's associated company Metsä Fibre was issued an environmental permit in December 2020, and the investment decision was made on 11 February 2021.
The value of the bioproduct mill investment is approximately EUR 1.6 billion, and the construction project will take roughly two and a half years. The bioproduct mill will produce annually around 1.5 million tonnes of softwood and hardwood pulp, as well as other bioproducts. 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 bioproduct mill will not use any fossil fuels, and its electricity self-sufficiency will be high, 250%. 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 2,623 (30 June 2020: 2,662), of whom 1,631 (1,624) were based in Finland. In January–June, Metsä Board had an average of 2,464 employees (1–6/2020: 2,459). Personnel expenses in January–June totalled EUR 110.4 million (97.0). 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.
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KEY SUSTAINABILITY FIGURES
| 2021 Q2 | 2020 Q2 | 2021 Q1–Q2 | 2020 Q1–Q2 | 2020 Q1–Q4 | Target year 2030 | |
|---|---|---|---|---|---|---|
| Total recordable incident frequency TRIF^{1)} | 11.1 | 8.6 | 11.5 | 7.6 | 8.4 | 0 |
| Lost-time accidents | ||||||
| frequency LTA1F^{1)} | 8.4 | 4.8 | 8.6 | 5.1 | 5.7 | 0 |
| Share of certified wood fibre, % | 82% | 78% | 83% | 79% | 80% | >90% |
| Energy efficiency improvement^{2)} | +2.1% | +1.6% | - | - | +2.1% | +10% |
| Reduction in process water use^{2)} | -12.8% | -8.3% | - | - | -7.7% | -30% |
1) per million hours worked
2) change from the base year of 2018, per tonne produced, rolling 12 months
The frequency of accidents in April–June 2021 was clearly higher than in the corresponding period the year before. Most of the accidents consisted of injuries to hands and feet. Safety at work is developed with proactive measures, a common way of working and by following a standardised management system. The target is zero accidents.
All wood used by Metsä Board comes from sustainably managed Northern European forests. In April–June 2021, certified wood fibre accounted for 82% of all wood fibre purchased by the company. The target is for at least 90% of the wood fibre used by Metsä Board to be certified by the end of 2030.
During the last 12-month period, the use of process water per tonne produced reduced by 12.8% and energy efficiency improved by 2.1% compared to the base year of 2018. Metsä Board has financing arrangements whose pricing is tied to sustainability targets, such as reducing the specific consumption of energy and water.
During the review period, Metsä Board again achieved the highest level, Platinum, in EcoVadis's sustainability assessment. According to the evaluation, Metsä Board is among the top 1% in the category of paper, paperboard and packaging manufacturers. In addition, The Financial Times included Metsä Board on 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) the most in relation to their sales in 2014–2019. During the first half of the year, Metsä Board was included on CDP's Supplier Engagement Rating Leaderboard for supply chain engagement on climate issues. 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.
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 in terms of 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.
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 also 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.
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
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from wood fibre pulp, without intermediate phases. End uses will include food packaging. The demo plant reached rooftop height during the review period, and the first test runs are set to take place in late 2021.
CHANGES IN THE CORPORATE MANAGEMENT TEAM
Henri Sederholm was appointed CFO of Metsä Board. The previous CFO, Jussi Noponen, was appointed Metsä Board's SVP, Sales and Supply Chain.
Sari Pajari-Sederholm, previously Metsä Board's SVP, Sales and Marketing, was appointed Metsä Group's EVP, Strategy.
Sederholm and Noponen are part of Metsä Board's Corporate Management Team and report to Metsä Board's CEO Mika Joukio. All the changes mentioned above took effect on 1 May 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 has appealed the decision issued by the Tax Administration, as the company believes the losses are deductible. The Tax Administration's Adjustment Board dismissed the company's appeal in March 2018. In February 2021, the Administrative Court of Helsinki dismissed the appeal made by the company on the Board of Adjustment's decision. Metsä Board has applied for a leave to appeal the decision of the Administrative Court of Helsinki from the Supreme Administrative Court.
SHARES
At the end of the review period, the price for Metsä Board's B share on the Nasdaq Helsinki was EUR 8.68. The share's highest and lowest prices were EUR 11.01 and EUR 8.48, respectively. At the end of the review period, the price for Metsä Board's A share on the Nasdaq Helsinki was EUR 9.08. At the end of the review period, the average daily trading volumes of the B and A shares on the Nasdaq Helsinki were 424,609 shares and 9,470 shares, respectively. The total trading volume of the B share was EUR 495.8 million and the total trading volume of the A share was EUR 11.1 million.
At the end of the review period, the market value of all Metsä Board shares was EUR 3.1 billion, of which the market value of the B shares and the A shares accounted for EUR 2.8 billion and EUR 0.3 billion, respectively.
At the end of the review period, Metsäliitto Cooperative held 48% (30 June 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% (15) 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
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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. The company's annual total pulp position shows a surplus of roughly 400,000 tonnes, taking into account the minority ownership of the Husum pulp mill. A 10% decline (increase) 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 75 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 half-year financial 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
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.
ANNUAL MAINTENANCE AND INVESTMENT SHUTDOWNS IN 2021
The annual maintenance shutdowns of individual paperboard and BCTMP mills in Finland are spread evenly over the second, third and fourth quarters of 2021.
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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 Äänekoski bioproduct mill |
The Kemi integrated mill includes Metsä Board’s paperboard mill and Metsä Fibre’s pulp mill
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).
METSÄ BOARD CORPORATION
Espoo, Finland, 28 July 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 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’s next financial report
27 October 2021: Interim Report for January–September 2021
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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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HALF-YEAR FINANCIAL REPORT
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR million | Note | Q2 2021 | Q2 2020 | Q1-Q2 2021 | Q1-Q2 2020 | Q1-Q4 2020 |
|---|---|---|---|---|---|---|
| Sales | 2, 6 | 555.8 | 473.1 | 1,049.5 | 945.2 | 1,889.5 |
| Change in stocks of finished goods and work in progress | -37.2 | 14.2 | -15.0 | -7.5 | -38.7 | |
| Other operating income | 2, 6 | 12.1 | 8.8 | 14.3 | 10.9 | 33.3 |
| Material and services | 6 | -345.4 | -321.2 | -683.6 | -627.7 | -1,225.4 |
| Employee costs | -57.0 | -51.0 | -110.4 | -97.0 | -196.9 | |
| Share of result of associated company | 6 | 31.7 | 1.6 | 38.0 | -2.6 | -2.4 |
| Depreciation, amortisation and impairment losses | -22.7 | -26.1 | -46.3 | -51.7 | -94.5 | |
| Other operating expenses | -33.6 | -32.8 | -61.0 | -69.4 | -137.5 | |
| Operating result | 2 | 103.7 | 66.5 | 185.6 | 100.3 | 227.3 |
| Share of results of associated companies and joint ventures | 0.1 | 0.0 | 0.0 | -0.1 | -0.1 | |
| Net exchange gains and losses | -1.1 | 0.2 | -1.4 | -1.8 | -3.4 | |
| Other net financial items | 2, 6 | -2.8 | -2.8 | -5.5 | -5.7 | -11.5 |
| Result before income tax | 99.8 | 63.9 | 178.7 | 92.7 | 212.3 | |
| Income taxes | 3 | -13.9 | -12.1 | -28.6 | -18.9 | -42.2 |
| Result for the period | 85.9 | 51.7 | 150.1 | 73.8 | 170.1 |
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| EUR million | Note | Q2 2021 | Q2 2020 | Q1-Q2 2021 | Q1-Q2 2020 | Q1-Q4 2020 |
|---|---|---|---|---|---|---|
| Other comprehensive income | ||||||
| Items that will not be reclassified to profit or loss | ||||||
| Actuarial gains/losses on defined pension plans | -0.9 | -1.6 | 3.0 | 0.5 | -3.7 | |
| Financial assets valued at fair value through other comprehensive income | 8 | -1.2 | -67.9 | -8.6 | -61.0 | -70.3 |
| Share of other comprehensive income of associated company | 0.1 | 0.3 | 0.0 | 0.3 | 0.4 | |
| Income tax relating to items that will not be reclassified | 0.4 | 13.8 | 1.1 | 12.1 | 15.0 | |
| Total | -1.6 | -55.4 | -4.5 | -48.0 | -58.6 | |
| Items that may be reclassified to profit or loss | ||||||
| Cash flow hedges | 13.0 | 32.0 | -15.1 | -2.9 | 17.6 | |
| Translation differences | 6.9 | 15.0 | 0.1 | -2.7 | 6.2 | |
| Share of other comprehensive income of associated company | 1.6 | 2.6 | -3.2 | -0.6 | 0.7 | |
| Income tax relating to components of other comprehensive income | -2.9 | -6.4 | 3.0 | 0.7 | -3.4 | |
| Total | 18.6 | 43.1 | -15.2 | -5.5 | 21.1 | |
| Other comprehensive income, net of tax | 16.9 | -12.3 | -19.7 | -53.6 | -37.5 | |
| Total comprehensive income for the period | 102.8 | 39.4 | 130.5 | 20.3 | 132.6 | |
| Result for the period attributable to | ||||||
| Shareholders of parent company | 81.2 | 51.7 | 144.1 | 73.8 | 170.1 | |
| Non-controlling interests | 4.7 | 6.1 | ||||
| Total | 85.9 | 51.7 | 150.1 | 73.8 | 170.1 | |
| Total comprehensive income for the period attributable to | ||||||
| Shareholders of parent company | 96.7 | 39.4 | 124.0 | 20.3 | 132.6 | |
| Non-controlling interests | 6.1 | 6.4 | ||||
| Total | 102.8 | 39.4 | 130.5 | 20.3 | 132.6 | |
| Earnings per share for result attributable to shareholders of parent company (EUR/share) | 0.23 | 0.15 | 0.41 | 0.21 | 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 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 12.4 | 12.4 | 12.4 | |
| Other intangible assets | 5.7 | 7.8 | 6.7 | |
| Tangible assets | 4 | 871.9 | 759.7 | 824.7 |
| Investments in associated companies and joint ventures | 403.7 | 367.3 | 369.0 | |
| Other investments | 8 | 178.2 | 193.9 | 186.9 |
| Other non-current financial assets | 6, 8 | 15.8 | 14.5 | 10.8 |
| Deferred tax receivables | 2 | 7.2 | 7.6 | 7.5 |
| 1,494.7 | 1,363.2 | 1,417.9 | ||
| Current assets | ||||
| Inventories | 361.4 | 363.7 | 360.0 | |
| Accounts receivable and other receivables | 6, 8 | 377.4 | 319.6 | 310.6 |
| Cash and cash equivalents | 6, 8 | 445.8 | 153.2 | 214.0 |
| 1,184.7 | 836.5 | 884.6 | ||
| Total assets | 2,679.4 | 2,199.7 | 2,302.5 | |
| SHAREHOLDERS’ EQUITY AND LIABILITIES | ||||
| Shareholders’ equity | ||||
| Equity attributable to shareholders of parent company | 1,549.5 | 1,270.4 | 1,383.8 | |
| Non-controlling interests | 132.2 | |||
| Total equity | 1,681.7 | 1,270.4 | 1,383.8 | |
| Non-current liabilities | ||||
| Deferred tax liabilities | 92.7 | 92.4 | 97.5 | |
| Post-employment benefit obligations | 2 | 12.6 | 13.3 | 13.4 |
| Provisions | 5 | 3.7 | 4.2 | 3.7 |
| Borrowings | 8 | 441.7 | 445.2 | 444.8 |
| Other liabilities | 8 | 4.2 | 5.8 | 5.3 |
| 554.9 | 560.9 | 564.7 | ||
| Current liabilities | ||||
| Provisions | 5 | 1.0 | 0.6 | 1.0 |
| Current borrowings | 6, 8 | 10.7 | 16.3 | 7.6 |
| Accounts payable and other liabilities | 6, 8 | 431.2 | 351.5 | 345.4 |
| 442.9 | 368.4 | 354.0 | ||
| Total liabilities | 997.8 | 929.3 | 918.7 | |
| Total shareholders’ equity and liabilities | 2,679.4 | 2,199.7 | 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 | 73.8 | 73.8 | 73.8 | ||||||
| Other comprehensive income net of tax total | -3.7 | -50.3 | 0.4 | -53.6 | -53.6 | ||||
| Comprehensive income total | -3.7 | -50.3 | 74.2 | 20.3 | 20.3 | ||||
| Share based payments | -2.6 | -2.6 | -2.6 | ||||||
| Related party transactions | |||||||||
| Dividend and capital distribution | -49.8 | -35.6 | -85.3 | -85.3 | |||||
| Shareholders' equity, 30 June 2020 | 557.9 | -32.8 | 125.2 | 265.8 | 354.3 | 1,270.4 | 1,270.4 | ||
| 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 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 | 144.1 | 144.1 | 6.1 | 150.1 | |||||
| Other comprehensive income net of tax total | 0.4 | -22.8 | 2.4 | -20.0 | 0.4 | -19.7 | |||
| Comprehensive income total | 0.4 | -22.8 | 146.4 | 124.0 | 6.4 | 130.5 | |||
| Share based payments | -0.4 | -0.4 | -0.4 | ||||||
| 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 June 2021 | 557.9 | -24.4 | 113.8 | 208.9 | 693.4 | 1,549.5 | 132.2 | 1,681.7 |
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-Q2 | Q1-Q2 | Q1-Q4 | Q2 |
|---|---|---|---|---|---|
| 2021 | 2020 | 2020 | 2021 | ||
| Result for the period | 150.1 | 73.8 | 170.1 | 85.9 | |
| Total adjustments | 7 | 38.3 | 73.3 | 140.6 | 2.3 |
| Change in working capital | -18.2 | -5.4 | 37.9 | 61.4 | |
| Net financial items | 7 | -3.0 | 18.3 | 4.2 | -3.3 |
| Income taxes paid | -16.6 | -7.7 | -45.2 | -12.4 | |
| Net cash flow from operations | 150.7 | 152.3 | 307.7 | 134.0 | |
| Investments in intangible and tangible assets | -95.6 | -69.1 | -154.2 | -61.9 | |
| Disposals and other items | 6, 7 | 9.1 | 8.0 | 12.2 | 8.9 |
| Net cash flow from investing | -86.5 | -61.1 | -142.0 | -52.9 | |
| Changes in non-controlling interests | 7 | 261.2 | |||
| Changes in non-current loans and in other financial items | 6 | -2.7 | 14.1 | 1.0 | -12.8 |
| Paid dividend and capital distribution | -92.4 | -85.3 | -85.3 | -92.4 | |
| Net cash flow from financing | 166.0 | -71.3 | -84.4 | -105.2 | |
| Changes in cash and cash equivalents | 230.1 | 19.9 | 81.3 | -24.2 | |
| Cash and cash equivalents at beginning of period | 6 | 214.0 | 134.2 | 134.2 | 467.8 |
| Translation difference in cash and cash equivalents | 1.7 | -0.9 | -1.5 | 2.2 | |
| Changes in cash and cash equivalents | 230.1 | 19.9 | 81.3 | -24.2 | |
| Cash and cash equivalents at end of period | 6 | 445.8 | 153.2 | 214.0 | 445.8 |
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 28 July 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 | Q2 2021 | Q2 2020 | Q1-Q2 2021 | Q1-Q2 2020 | Q1–Q4 2020 |
|---|---|---|---|---|---|
| EMEA | 359.5 | 325.1 | 697.2 | 647.0 | 1,281.8 |
| Americas | 128.8 | 107.2 | 247.8 | 218.7 | 440.7 |
| APAC | 67.5 | 40.9 | 104.6 | 79.5 | 167.0 |
| Total | 555.8 | 473.1 | 1,049.5 | 945.2 | 1,889.5 |
RECONCILIATION OF COMPARABLE FIGURES
| EUR million | Q2 2021 | Q2 2020 | Q1-Q2 2021 | Q1-Q2 2020 | Q1–Q4 2020 |
|---|---|---|---|---|---|
| Operating result | 103.7 | 66.5 | 185.6 | 100.3 | 227.3 |
| Depreciation, amortisation and impairment losses | 22.7 | 26.1 | 46.3 | 51.7 | 94.5 |
| EBITDA | 126.3 | 92.6 | 231.9 | 151.9 | 321.8 |
| Items affecting comparability: | |||||
| Other operating income | -9.6 | -6.0 | -9.6 | -6.0 | -6.0 |
| Share of results of associated companies | 6.9 | ||||
| Other operating expense | 8.5 | 8.5 | |||
| Total | -1.2 | -6.0 | 5.7 | -6.0 | -6.0 |
| EBITDA, comparable | 125.2 | 86.6 | 237.6 | 145.9 | 315.8 |
| Depreciation, amortisation and impairment losses | -22.7 | -26.1 | -46.3 | -51.7 | -94.5 |
| Operating result, comparable | 102.5 | 60.5 | 191.3 | 94.2 | 221.2 |
| Share of results of associated companies and joint ventures | 0.1 | 0.0 | 0.0 | -0.1 | -0.1 |
| Net financial items | -3.9 | -2.6 | -6.9 | -7.5 | -14.9 |
| Result before income tax, comparable | 98.7 | 57.8 | 184.4 | 86.7 | 206.3 |
| Income taxes | -13.9 | -12.1 | -28.6 | -18.9 | -42.2 |
| Income taxes related to items affecting comparability | 0.2 | 1.2 | 0.2 | 1.2 | 1.2 |
| Result for the period, comparable | 84.9 | 46.9 | 156.0 | 69.0 | 165.3 |
“+” sign items = expense affecting comparability
“-” sign items = income affecting comparability
Items affecting operating result comparability in 2021 totalled EUR -5.7 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 and EUR -5.8 million in costs related to the fire of chip conveyor at the Husum pulp mill.
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-Q2 | Q1-Q2 | Q1-Q4 |
|---|---|---|---|
| 2021 | 2020 | 2020 | |
| Taxes for the current period | 27.9 | 19.5 | 41.8 |
| Taxes for the prior periods | 0.9 | -0.1 | 0.2 |
| Change in deferred taxes | -0.2 | -0.6 | 0.2 |
| Total income taxes | 28.6 | 18.9 | 42.2 |
NOTE 4 – CHANGES IN PROPERTY, PLANT AND EQUIPMENT
| EUR million | Q1-Q2 | Q1-Q2 | Q1-Q4 |
|---|---|---|---|
| 2021 | 2020 | 2020 | |
| Carrying value at beginning of period | 824.7 | 742.0 | 742.0 |
| Investments to owned property, plant and equipment | 95.8 | 70.0 | 161.1 |
| Investments to leased property, plant and equipment | 2.5 | 3.1 | 4.5 |
| Decreases | -2.6 | -2.8 | -2.4 |
| Depreciation, amortization and impairment losses | -45.2 | -50.6 | -92.4 |
| Translation difference | -3.3 | -1.9 | 11.9 |
| Carrying value at end of the period | 871.9 | 759.7 | 824.7 |
There were no impairment losses recognised in 2021 or in 2020.
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 | 0.0 | 0.0 | ||
| 30 June 2021 | 0.2 | 3.4 | 1.0 | 4.7 |
| Non-Current Provisions | 2.7 | 1.0 | 3.7 | |
| Current Provisions | 0.2 | 0.8 | 0.0 | 1.0 |
| Total | 0.2 | 3.4 | 1.0 | 4.7 |
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-Q2 2021 | Q1-Q2 2020 | Q1-Q4 2020 |
|---|---|---|---|
| Sales | 44.5 | 38.0 | 75.4 |
| Other operating income | 2.4 | 2.2 | 4.0 |
| Purchases | 334.1 | 301.6 | 598.7 |
| Share of result from associated company | 38.0 | -2.6 | -2.4 |
| Interest income | 0.0 | 0.0 | 0.1 |
| Interest expenses | 0.5 | 0.4 | 0.9 |
| Accounts receivable and other receivables | 40.9 | 28.9 | 50.2 |
| Cash and cash equivalents | 435.3 | 145.1 | 204.7 |
| Accounts payable and other liabilities | 57.7 | 59.5 | 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-Q2 2021 | Q1-Q2 2020 | Q1-Q4 2020 |
|---|---|---|---|
| Sales | 0.3 | 0.3 | 0.5 |
| Purchases | 2.1 | 0.7 | 3.0 |
| Other non-current financial assets | |||
| Accounts receivable and other receivables | 0.0 | 0.0 | 0.2 |
| Accounts payable and other liabilities | 0.8 | 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-Q2 | Q1-Q2 | Q1-Q4 | Q2 |
|---|---|---|---|---|
| 2021 | 2020 | 2020 | 2021 | |
| Taxes | 28.6 | 18.9 | 42.2 | 13.9 |
| Depreciation, amortization and impairment charges | 46.3 | 51.7 | 94.5 | 22.7 |
| Share of result from associated companies and joint ventures | -38.1 | 2.7 | 2.5 | -31.7 |
| Gains and losses on sale of fixed assets | -7.1 | -7.2 | -14.0 | -7.0 |
| Finance costs, net | 6.9 | 7.5 | 14.9 | 3.9 |
| Pension liabilities and provisions | -0.2 | -0.7 | -1.0 | -0.1 |
| Other adjustments | 1.8 | 0.5 | 1.5 | 0.7 |
| Total | 38.3 | 73.3 | 140.6 | 2.3 |
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 9.1 million in total. They consisted of sales proceeds of EUR 8.7 million from sale of non-business related land area 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 June 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 | 174.8 | 178.2 | |
| Other non-current financial assets | 13.5 | 13.5 | ||
| Accounts receivable and other receivables | 360.2 | 360.2 | ||
| Cash and cash equivalent | 0.0 | 445.8 | 445.8 | |
| Derivative financial instruments | 0.3 | 20.9 | 21.2 | |
| Total carrying amount | 3.7 | 195.6 | 819.5 | 1,018.9 |
| Total fair value | 3.7 | 195.6 | 819.5 | 1,018.8 |
Financial liabilities 30 June 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 | 441.7 | 441.7 | ||
| Other non-current financial liabilities | 0.4 | 0.4 | ||
| Current interest-bearing financial liabilities | 10.7 | 10.7 | ||
| Accounts payable and other financial liabilities | 370.8 | 370.8 | ||
| Derivative financial instruments | 1.6 | 11.0 | 12.6 | |
| Total carrying amount | 1.6 | 11.0 | 823.5 | 836.0 |
| Total fair value | 1.6 | 11.0 | 856.1 | 868.7 |
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Classification of financial assets and liabilities and their fair values
Financial assets 30 June 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 | 190.5 | 194.0 | |
| Other non-current financial assets | 14.1 | 14.1 | ||
| Accounts receivable and other receivables | 305.2 | 305.2 | ||
| Cash and cash equivalent | 0.0 | 153.2 | 153.2 | |
| Derivative financial instruments | 0.2 | 14.5 | 14.7 | |
| Total carrying amount | 3.7 | 204.9 | 472.5 | 681.1 |
| Total fair value | 3.7 | 204.9 | 472.5 | 681.1 |
Financial liabilities 30 June 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 | 445.2 | 445.2 | ||
| Other non-current financial liabilities | 0.3 | 0.3 | ||
| Current interest-bearing financial liabilities | 16.3 | 16.3 | ||
| Accounts payable and other financial liabilities | 298.6 | 298.6 | ||
| Derivative financial instruments | 0.4 | 9.8 | 10.2 | |
| Total carrying amount | 0.4 | 9.8 | 760.3 | 770.6 |
| Total fair value | 0.4 | 9.8 | 776.1 | 786.3 |
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 0.3–1.5% (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 June 2021
| EUR million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at fair value | ||||
| Other non-current investments | 0.0 | 178.2 | 178.2 | |
| Derivative financial assets | 10.1 | 11.1 | 21.2 | |
| Financial liabilities measured at fair value | ||||
| Derivative financial liabilities | 0.4 | 12.2 | 12.6 | |
| Financial assets not measured at fair value | ||||
| Cash and cash equivalent | 445.8 | 445.8 | ||
| Financial liabilities not measured at fair value | ||||
| Non-current interest-bearing financial liabilities | 474.4 | 474.4 | ||
| Current interest-bearing financial liabilities | 10.6 | 10.6 |
Fair value hierarchy of financial assets and liabilities as of 30 June 2020
| EUR million | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at fair value | ||||
| Other non-current investments | 0.0 | 193.9 | 193.9 | |
| Derivative financial assets | 1.4 | 13.3 | 14.7 | |
| Financial liabilities measured at fair value | ||||
| Derivative financial liabilities | 3.2 | 7.0 | 10.2 | |
| Financial assets not measured at fair value | ||||
| Cash and cash equivalent | 153.1 | 153.1 | ||
| Financial liabilities not measured at fair value | ||||
| Non-current interest-bearing financial liabilities | 460.9 | 460.9 | ||
| Current interest-bearing financial liabilities | 16.4 | 16.4 |
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Other non-current investments at fair value based on Level 3
| EUR million | Q1-Q2 2021 | Q1-Q2 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 | -8.6 | -61.0 | -70.3 |
| Purchases | 2.2 | ||
| Disposals | 0.0 | -0.1 | -0.1 |
| Carrying value at end of the period | 178.2 | 193.9 | 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 June 2021 was 3.29% (31 December 2020: 2.87) and 4.29% (3.87) for the Olkiluoto 3 power plant under construction. The acquisition cost of shares in Pohjolan Voima Oyj on 30 June 2021 is EUR 40.2 million (40.2) and fair value EUR 174.8 million (183.4).
The carrying value of other investments as of 30 June 2021 is estimated to change by EUR -7.9 million and EUR 8.6 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 78.9 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 June 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 |
| 2.6 | -2.6 | -2.6 | ||||
| Interest rate derivatives | 100.0 | 2.6 | -2.6 | -2.6 | ||
| Currency forward contracts | 1,001.7 | 3.8 | 9.6 | -5.8 | -1.2 | -4.6 |
| Currency derivatives | 1,001.7 | 3.8 | 9.6 | -5.8 | -1.2 | -4.6 |
| Electricity derivatives | 7.2 | 3.9 | 0.0 | 3.8 | 3.8 | |
| Oil derivatives | 19.6 | 5.0 | 0.3 | 4.7 | 4.7 | |
| Other commodity derivatives | 11.3 | 8.5 | 8.5 | 8.5 | ||
| Commodity derivatives | 38.2 | 17.4 | 0.4 | 17.0 | 17.0 | |
| Derivatives total | 1,139.9 | 21.2 | 12.6 | 8.6 | -1.2 | 9.9 |
Derivatives 30 June 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 |
| 3.6 | -3.6 | -3.6 | ||||
| Interest rate derivatives | 100.0 | 3.6 | -3.6 | -3.6 | ||
| Currency forward contracts | 864.8 | 13.2 | 1.8 | 11.4 | -0.2 | 11.6 |
| Currency option contracts | 215.6 | 0.1 | 0.1 | |||
| Currency derivatives | 1,080.5 | 13.3 | 1.8 | 11.4 | -0.2 | 11.6 |
| Electricity derivatives | 14.7 | 0.7 | 1.8 | -1.2 | -1.2 | |
| Oil derivatives | 15.3 | 0.7 | 0.9 | -0.2 | -0.2 | |
| Other commodity derivatives | 8.8 | 0.0 | 2.1 | -2.0 | -2.0 | |
| Commodity derivatives | 38.8 | 1.4 | 4.8 | -3.4 | -3.4 | |
| Derivatives total | 1,219.2 | 14.7 | 10.2 | 4.5 | -0.2 | 4.7 |
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NOTE 9 – COMMITMENTS AND GUARANTEES
| EUR million | 30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 |
|---|---|---|---|
| Liabilities secured by collateral | 7.8 | ||
| Pledges granted | 129.9 | ||
| Real estate mortgages | 232.8 | 192.8 | |
| Total pledges and mortgages | 362.6 | 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 | 365.5 | 195.7 |
COMMITMENTS RELATED TO PROPERTY, PLANT AND EQUIPMENT
| EUR million | 30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 |
|---|---|---|---|
| Payments due in following 12 months | 57.1 | 39.8 | 60.4 |
| Payments due later | 4.1 | ||
| Total | 61.1 | 39.8 | 60.4 |
Commitments related to property, plant and equipment concern mainly the first phase of the modernisation of the Husum pulp mill.
NOTE 10 – 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.