Metsä Group Half Year Financial Report 2016 4 August 2016 at 12:00 noon EET
January–June 2016 (1–6/2015)
- Sales were EUR 2,339 million (EUR 2,585 million).
- Operating result excluding non-recurring items was EUR 229 million (266). Operating result including non-recurring items was EUR 225 million (272).
- Result before taxes excluding non-recurring items was EUR 190 million (230). Result before taxes including non-recurring items was EUR 186 million (234).
- Return on capital employed excluding non-recurring items was 11.0 per cent (13.7). Return on capital employed excluding non-recurring items and excluding assets under construction related to strategic investment projects was 12.2 per cent (13.9).
- Cash flow from operations was EUR 121 million (333).
April–June 2016 (4–6/2015)
- Sales were EUR 1,184 million (EUR 1,330 million).
- Operating result excluding non-recurring items was EUR 120 million (137). Operating result including non-recurring items was EUR 119 million (154).
- Result before taxes excluding non-recurring items was EUR 100 million (114). Result before taxes including non-recurring items was EUR 98 million (128).
- Return on capital employed excluding non-recurring items was 11.5 per cent (13.8). Return on capital employed excluding non-recurring items and excluding assets under construction related to strategic investment projects was 12.6 per cent (14.0).
- Cash flow from operations was EUR 152 million (266).
Events during the second quarter of 2016
- The bioproduct mill project proceeded according to the planned schedule and reached its halfway point in June.
- The market price of long-fibre pulp increased by one per cent. The price of short-fibre pulp decreased by 9 per cent compared to the previous quarter.
- The demand for paperboards remained stable in both Europe and the Americas. Price levels were stable. Metsä Board announced it will increase the price of white fresh forest fibre linerboard and folding boxboard in Europe.
- Metsä Wood announced it will launch an investment programme of approximately EUR 100 million in the plywood and Kerto® LVL operations.Metsä Group announced that its sawmills in Finland will be transferred from Metsä Wood to Metsä Fibre through an internal transaction by the end of 2016.
Events after review period
Metsä Board is planning to close down its wallpaper base machine PM3 and discontinue its loss-making wallpaper base manufacturing at the Kyro mill in Hämeenkyrö, Finland. In addition, the company adjusts and improves operations at the Kyro mill in order to increase its competitiveness. The company will commence related statutory labour negotiations covering all employees at the mill. The estimated personnel effect is up to 100 employees.
Profit guidance for July–September 2016
Metsä Group’s operating result excluding non-recurring items in the third quarter of 2016 is expected to be slightly weaker than in the second quarter of 2016.
President and CEO Kari Jordan:
“Metsä Group’s second quarter in 2016 was as we expected. The operating result compared to the previous year was affected by the lower market price of pulp and the start-up phase of the new folding boxboard production line at Husum.
The production volumes of Husum’s new folding boxboard production line have increased and its operational reliability has clearly improved. Full production capacity is expected to be achieved by the end of this year. The printing paper production at the Husum mill and in the entire Metsä Group came to an end in its entirety in July.
The construction of the bioproduct mill in Äänekoski is progressing according to the planned schedule and on budget. More than half of the mill, to be started up in the third quarter of 2017, is currently complete.
In June, we announced a development programme of approximately EUR 100 million in the plywood and Kerto ® LVL operations, which will enable us to better meet the globally growing demand and improve our competitiveness. The programme includes investments in both Finland and Estonia, and it will be implemented in steps by the end of 2018.
As economic growth in Europe continues to be sluggish, our focus areas for sales growth are in North America, Asia, and Oceania.”
Key figures
| 2016 | 2015 | 2016 | 2015 | 2015 | |
| Condensed income statement, EUR million | 1–6 | 1–6 | 4–6 | 4–6 | 1–12 |
| Sales | 2 339.5 | 2 585.3 | 1 183.9 | 1 330.2 | 5 016.0 |
| Other operating income | 25.2 | 68.2 | 16.8 | 52.9 | 95.7 |
| Operating expenses | -2 013.6 | -2 245.1 | -1 022.8 | -1 161.9 | -4 311.4 |
| Depreciation and impairment losses | -125.8 | -136.5 | -59.5 | -67.1 | -258.2 |
| Operating result | 225.3 | 271.9 | 118.5 | 154.0 | 542.1 |
| Share of results from associated companies and joint ventures | -0.9 | 9.3 | -0.8 | 3.2 | 11.2 |
| Exchange gains and losses | -0.5 | -3.2 | 0.5 | -6.7 | -1.2 |
| Other net financial items | -37.9 | -43.7 | -20.0 | -22.4 | -83.8 |
| Result before income tax | 186.0 | 234.3 | 98.2 | 128.2 | 468.4 |
| Income tax | -42.1 | -53.0 | -22.6 | -35.5 | -112.6 |
| Result for the period | 143.9 | 181.3 | 75.7 | 92.7 | 355.7 |
| 2016 | 2015 | 2016 | 2015 | 2015 | |
| Profitability | 1–6 | 1–6 | 4–6 | 4–6 | 1–12 |
| Operating result, EUR million | 225.3 | 271.9 | 118.5 | 154.0 | 542.1 |
| excluding non-recurring items | 229.3 | 265.8 | 119.8 | 137.1 | 537.4 |
| % of sales | 9.8 | 10.3 | 10.1 | 10.3 | 10.7 |
| Return on capital employed, % | 10.8 | 14.0 | 11.4 | 15.5 | 13.7 |
| excluding non-recurring items | 11.0 | 13.7 | 11.5 | 13.8 | 13.6 |
| Return on equity, % | 11.8 | 16.6 | 12.4 | 16.5 | 15.9 |
| excluding non-recurring items | 12.1 | 16.3 | 12.6 | 13.9 | 15.8 |
| 2016 | 2015 | 2016 | 2015 | 2015 | |
| Financial position | 30.6. | 30.6. | 31.3. | 31.3. | 31.12. |
| Equity ratio, % | 44.8 | 41.9 | 42.8 | 39.0 | 43.2 |
| Net gearing ratio, % | 38 | 34 | 35 | 41 | 25 |
| Interest-bearing net liabilities, EUR million | 945 | 779 | 847 | 887 | 610 |
Segments
| Sales and Operating result 1–6/2016, EUR million | Wood Supply and Forest Services | Wood Products Industry | Pulp Industry | Paperboard Industry | Tissue and Cooking Papers |
| Sales | 779.0 | 437.9 | 648.9 | 858.5 | 495.1 |
| Other operating income | 3.7 | 5.2 | 5.7 | 14.3 | 1.6 |
| Operating expenses | -766.6 | -411.3 | -503.6 | -757.7 | -450.1 |
| Depreciation and impairment losses | -1.7 | -17.1 | -35.3 | -48.0 | -19.8 |
| Operating result | 14.3 | 14.7 | 115.7 | 67.2 | 26.7 |
| Non-recurring items | - | 5.5 | - | 3.6 | - |
| Operating result excluding non-recurring items | 14.3 | 20.2 | 115.7 | 70.8 | 26.7 |
Near-term outlook
Wood demand will target felling sites to be harvested when the ground is unfrozen and, in terms of energy wood, crown wood. The uncertainties related to the Act on the Financing of Sustainable Forestry will have a negative impact on the demand for forest management services.
The market balance and sales prices of sawn timber are expected to improve as a whole. The market situation in North Africa will create uncertainty in the demand for pine sawn timber. Demand in the Chinese market is expected to quiet down seasonally. The demand for Kerto ® LVL wood products is expected to continue to be brisk, but competition in plywood products will remain fierce.
The demand for long-fibre pulp is expected to continue to grow moderately globally. The annual maintenance shutdowns of two of Metsä Fibre’s pulp mills are scheduled for the third quarter.
Metsä Board’s paperboard deliveries are expected to grow in July–September from the second quarter of 2016. Demand for paperboard is expected to remain stable in both Europe and the Americas.
The market prices of folding boxboard and white fresh forest fibre linerboard are expected to remain stable or increase slightly. Metsä Board has announced an increase in the price of white fresh forest fibre linerboard and folding boxboard in Europe. The result development will continue to be affected by the start-up volumes of folding boxboard at Husum, which will reduce the average price of folding boxboard.
In the tissue and cooking paper markets, demand is expected to continue to be stable in all market areas. Demand for tissue paper is expected to increase in eastern Central Europe, in particular, and demand for cooking papers is expected to grow in Asia.
Disclosure procedure
Metsä Group follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its Half Year Financial Report for January–June 2016 enclosed to this stock exchange release. Metsä Group’s complete Half Year Financial 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
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
Metsä Group will publish its Interim Report for January–September 2016 on 2 November, 2016.
Metsä Group is a forerunner in bioeconomy utilising renewable wood from sustainably managed northern forests. Metsä Group focuses on wood supply and forest services, wood products, pulp, fresh forest fibre paperboards and tissue and cooking papers.
Metsä Group’s sales totalled EUR 5.0 billion in 2015, and it employs approximately 9,600 people. The Group operates in some 30 countries. Metsäliitto Cooperative is the parent company of Metsä Group and owned by approximately 116,000 Finnish forest owners.
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