Metsä Group Interim Report 1–9/2015 Stock Exchange Release 5 November 2015 at 12.00 noon EET Result for January–September • Sales were EUR 3,811 million (1–9/2014: EUR 3,723 million). • Operating result excluding non-recurring items was EUR 415 million (301). Operating result including non-recurring items was EUR 414 million (333). • Result before taxes excluding non-recurring items was EUR 358 million (238). Result before taxes including non-recurring items was EUR 355 million (262). • Return on capital employed excluding non-recurring items was 14.2 per cent (11.1). • Cash flow from operations was EUR 626 million (374). Result for July–September • Sales were EUR 1,225 million (7–9/2014: EUR 1,204 million). • Operating result excluding non-recurring items was EUR 149 million (104). Operating result including non-recurring items was EUR 142 million (103). • Result before taxes excluding non-recurring items was EUR 128 million (81). Result before taxes including non-recurring items was EUR 121 million (79). • Return on capital employed excluding non-recurring items was 14.6 per cent (10.7). • Cash flow from operations was EUR 293 million (180). Events during the third quarter • The construction of Metsä Fibre's bioproduct mill in Äänekoski progressed according to plan. • Paperboard deliveries to Europe and America grew. Paperboard price levels were stable. • The production of coated paper ended at the Husum mill. • Metsä Tissue strengthened its tissue paper upgrading capacity at the Krapkowice mill in Poland. Production on the new upgrading line will begin at the end of this year. • Metsä Wood announced that it will adjust production at its pine and spruce sawmills in Finland. “Metsä Group’s profit-making ability continues to be strong. The operating result for the third quarter excluding non-recurring items improved slightly from the previous quarter and was considerably better than in the corresponding period last year. Our cash flow was strong during the third quarter.
The demand for our main products was at a good level during the third quarter, except for sawn timber, and no significant changes took place in average prices. Our profitability, on the other hand, was burdened by a demonstration against the actions of the Finnish government, which affected the forest industry particularly strongly. Operational reliability has become a significant factor in considering new investments.
I am satisfied that the bioeconomy has risen to the centre of discussion in Finland and the role of forests as the most important natural resource of our country is beginning to regain the value it deserves. Finland needs bold action and new ideas to rise out of the current uncertain economic situation and reverse the general negative trend. Metsä Group's Äänekoski bioproduct mill will respond to this challenge in a significant way. We laid the foundation stone of the bioproduct mill in October, and we are determinedly progressing towards the autumn of 2017, when the mill will begin operations. The investment programme at the Husum mill in Sweden is also progressing well. Towards the end of the year, a new folding boxboard machine will be installed and two paper machines will be closed.
The measures taken by the Finnish government to resolve the country's competitiveness issue have been correct and inevitable from the export industry's point of view. The overall economic situation continues to be challenging. Expensive demonstrations make the situation even more difficult."
Kari Jordan, President & CEO
Metsä Group
| 2015 | 2014 | 2015 | 2014 | 2014 | |
| Income statement, EUR million | 1–9 | 1–9 | 7–9 | 7–9 | 1–12 |
| Sales | 3 810.6 | 3 722.8 | 1 225.2 | 1 203.6 | 4 970.3 |
| Other operating income | 78.8 | 141.2 | 10.6 | 16.9 | 170.3 |
| Operating expenses | -3 277.5 | -3 342.3 | -1 032.4 | -1 054.5 | -4 447.5 |
| Depreciation and impairment losses | -197.9 | -188.9 | -61.4 | -63.1 | -276.2 |
| Operating result | 413.9 | 332.7 | 142.0 | 102.9 | 416.9 |
| Share of results from associated companies and joint ventures | 8.5 | 14.5 | -0.8 | -0.9 | 16.4 |
| Exchange gains and losses | -3.8 | -1.2 | -0.6 | -0.0 | 2.7 |
| Other net financial items | -63.7 | -83.7 | -20.0 | -22.6 | -106.1 |
| Result before income tax | 355.0 | 262.3 | 120.7 | 79.4 | 329.9 |
| Income tax | -91.4 | -58.6 | -38.4 | -17.4 | -69.7 |
| Result for the period | 263.6 | 203.7 | 82.3 | 62.0 | 260.3 |
| 2015 | 2014 | 2015 | 2014 | 2014 | |
| Profitability | 1–9 | 1–9 | 7–9 | 7–9 | 1–12 |
| Operating result, EUR million | 413.9 | 332.7 | 142.0 | 102.9 | 416.9 |
| - ” -, excluding non-recurring items | 414.7 | 300.9 | 149.0 | 104.3 | 418.1 |
| - ” -, % of sales | 10.9 | 8.1 | 12.2 | 8.7 | 8.4 |
| Return on capital employed, % | 14.2 | 12.0 | 13.9 | 10.6 | 11.1 |
| - ” -, excluding non-recurring items | 14.2 | 11.1 | 14.6 | 10.7 | 11.4 |
| Return on equity, % | 16.0 | 13.6 | 14.2 | 12.4 | 13.0 |
| - ” -, excluding non-recurring items | 16.2 | 12.0 | 15.4 | 12.6 | 13.4 |
| 2015 | 2014 | 2015 | 2014 | 2014 | |
| Financial position | 30.9. | 30.9. | 30.6. | 30.6. | 31.12. |
| Equity ratio, % | 42.7 | 38.5 | 41.9 | 37.9 | 37.9 |
| Net gearing ratio, % | 29 | 62 | 34 | 70 | 46 |
| Interest-bearing net liabilities, EUR million | 682 | 1 258 | 779 | 1 389 | 938 |
Segments
| Sales and Operating result 1–9/2015, EUR million | Wood Supply and Forest Services | Wood Products Industry | Pulp Industry | Paperboard Industry | Tissue and Cooking Papers |
| Sales | 1 153.2 | 664.3 | 1 071.1 | 1 545.3 | 751.9 |
| Other operating income | 6.2 | 4.4 | 12.9 | 37.8 | 2.9 |
| Operating expenses | -1 134.0 | -643.7 | -778.0 | -1 339.7 | -706.4 |
| Depreciation and impairment losses | -2.7 | -23.6 | -49.3 | -78.5 | -30.8 |
| Operating result | 22.7 | 1.4 | 256.7 | 164.9 | 17.7 |
| Non-recurring items | - | 22.5 | - | -20.1 | 18.9 |
| Operating result excluding non-recurring items | 22.7 | 23.9 | 256.7 | 144.8 | 36.6 |
| - " -, % of sales | 2.0 | 3.6 | 24.0 | 9.4 | 4.9 |
Near-term outlook Demand for stands harvested when the ground is unfrozen and crown wood will continue to be stable. The growth in the sales of forest management services is expected to continue.
Sales in the Wood Products Industry are expected to decrease slightly in the fourth quarter compared to the corresponding period of the previous year. In sawn timber, competition will continue to be intense due to oversupply, and Metsä Wood will continue to implement production curtailments during October–December. The demand for other wood products remain stable.
The global demand for softwood pulp is expected to continue its moderate growth. The utilisation rates of Metsä Fibre's mills are expected to remain at the level of the third quarter during the last quarter.
Delivery volumes and prices of paperboards are expected to be on a par with the previous quarter during the last quarter. Metsä Board has announced that it will increase the price of folding boxboard in Europe as of 1 December 2015.
The production shutdown connected with the installation of the new paperboard machine in Husum will impair Metsä Board's operating result for the fourth quarter by approximately EUR 12 million.
In the tissue paper market, demand is expected to continue to be stable in all market areas and to grow in eastern Central Europe, in particular.
Metsä Group’s operating result excluding non-recurring items in the last quarter of 2015 is expected to decline compared to the third quarter of 2015. The operating result is weakened by the shutdown of the Husum integrated mill related to the investment programme, and maintenance shutdowns at Pulp Industry. Disclosure procedure
Metsä Group follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its Interim Report for January–September 2015 enclosed to this stock exchange release. Metsä Group’s complete Interim Report is attached to this release in pdf-format and is also available on the company's web site at www.metsagroup.com METSÄ GROUP Group Communications For further information, please contact: Vesa-Pekka Takala, CFO, Metsä Group, tel. +358 (0)10 465 4260 Juha Laine, SVP, Communications, Metsä Group, tel. +358 (0)10 465 4541 www.metsagroup.com
Metsä Group is a responsible forest industry group whose products’ main raw material is renewable wood from sustainably managed northern forests. Metsä Group focuses on tissue and cooking papers, fresh forest fibre paperboards, pulp, wood products, and wood supply and forest services. Its high-quality products combine renewable raw materials, customer-orientation, sustainable development and innovation. Metsä Group’s sales totalled EUR 5 billion in 2014, and it employs approximately 9,800 people. The Group operates in some 30 countries. Metsäliitto Cooperative is the parent company of Metsä Group, and it is owned by approximately 120,000 Finnish forest owners.
