Metsä Board’s comparable operating result in January–March 2020 was EUR 34 million

Metsä Board Corporation Interim Report 1 January–31 March 2020  29 April 2020 at 12:00 noon EEST

January–March 2020 (compared to 1–3/2019)

• Sales were EUR 472.1 million (487.1).

• Comparable operating result was EUR 33.8 million (61.8), or 7.2% (12.7%) of sales. Operating result was EUR 33.8 million (71.9).

• Comparable earnings per share were EUR 0.06 (0.14), and earnings per share were EUR 0.06 (0.17).

• Comparable return on capital employed was 7.6% (14.4%).

• Net cash flow from operations was EUR 80.0 million (36.4).

As of the first quarter of 2020, the development of the reported quarter in Metsä Board’s interim report is compared to the corresponding quarter of the previous year. The reported review period will continue to be compared to the corresponding review period of the previous year.

Impacts from Covid-19 on Metsä Board’s business

The coronavirus pandemic has temporarily increased demand for pure and safe packaging materials, and the order inflows of Metsä Board’s paperboards have grown. In delivery logistics, there have been occasional capacity bottlenecks.

So far, the coronavirus has not had an impact on the production of Metsä Board’s mills. To minimise physical contact, the scope of the annual maintenance of mills scheduled for the second quarter of the year have been scaled down and partly postponed. 

Metsä Board’s financial position is good. The maturity profile of the loans is healthy and the company’s liquidity is adequate. The pre-engineering phase of the renewal of the Husum pulp mill and the investment’s preparatory construction work are progressing according to plan. 

The company has at its disposal substantial precautionary measures aiming to ensure the health and safety of the personnel and the continuity of the business. Despite the precautionary measures, a prolonged pandemic could lead to disruptions in production and/or the supply chain. The weakening of the world economy  attributable to the pandemic is also likely to reduce demand for Metsä Board’s products and thereby have a negative impact on the company’s profitability. 

Events in January–March 2020

• The strike at Finnish mills began on 27 January and ended on 10 February 2020. The strike concerned all Metsä Board’s mills in Finland and all pulp mills of Metsä Board’s associated company Metsä Fibre. The strike is estimated to have a negative impact of approximately EUR 20 million on Metsä Board’s operating result. Of this, approximately EUR 15 million materialized in the first quarter.

• Net cash flow from operations was strong, EUR 80 million.

• The coronavirus outbreak has temporarily increased demand for folding boxboard and white kraftliner. Metsä Board’s paperboard deliveries were on a higher level than in the corresponding period last year.

• The market prices of pulp were on a clearly lower level than in the corresponding period last year, which had a negative impact on profitability.

• There were no significant maintenance shutdowns during the review period. The scope and timing of maintenance shutdowns scheduled for the first half of the year have been reviewed due to the coronavirus situation.

• The first phase of the renewal of Husum’s pulp mill is progressing. Permission to begin the construction of the new recovery boiler was received in March, and the foundation work is now under way. The final investment decision will be made once the environmental permit has been secured.

• The Science Based Targets Initiative (SBTi) approved Metsä Board’s emission reduction targets. The company’s emission reduction targets concerning direct and indirect greenhouse gas emissions (Scope 1 and Scope 2) correspond with the reduction requirements necessary to limit global warming to 1.5 degrees.

Annual General Meeting of 2020

Metsä Board Corporation announced on 19 March 2020 its decision to cancel the Annual General Meeting convened for 26 March 2020. Metsä Board plans to hold its Annual General Meeting on 11 June 2020. The Notice to the meeting, including guidelines and procedures relating to the meeting will be published later, however three weeks before the meeting at the latest. The Board of Directors have decided not to amend the proposals already made to the Annual General Meeting.The Board of Directors proposes that a dividend of EUR 0.10 per share and a capital distribution of EUR 0.14 per share be paid for the 2019 financial period. The proposed dividend and capital distribution, totalling EUR 0.24 per share, corresponds to 59% of the earnings per share for 2019.

Near-term outlook

The duration of the pandemic caused by the coronavirus and the scope of its negative impact on the world economy and on Metsä Board’s business is difficult to estimate. At the moment, however, the order book of the company’s paperboards is on a strong level.

Metsä Board’s paperboard deliveries in the second quarter are expected to remain roughly on the level of the first quarter of 2020.

The market prices of folding boxboard and white kraftliner in local currencies are expected to remain stable.

The supply and demand of long-fibre pulp is expected to remain balanced, and market prices are not expected to decline.

The annual maintenance shutdowns of mills scheduled for April–June have partly been postponed to the second half of the year.

Changes in exchange rates, including the impact of hedges, will have a slightly positive impact on results during the second quarter of 2020 compared to the first quarter and a positive impact on results compared to the second quarter of 2019.

The production costs of paperboard and pulp are expected to remain stable.

Result guidance for April–June 2020

Metsä Board’s comparable operating result for the second quarter of 2020 is expected to improve compared to the first quarter of 2020.