Metsä Group Interim Report 1 January–30 September 2016 Stock Exchange Release 2 November 2016 at 12.00 noon EET
January–September 2016 (1–9/2015)
- Sales were EUR 3,483 million (EUR 3,811 million).
- Operating result was EUR 333 million (414). Comparable operating result was EUR 332 million (415).
- Result before taxes was EUR 275 million (355). Comparable result before taxes was EUR 275 million (358).
- Comparable return on capital employed was 10.5 per cent (14.2). Comparable return on capital employed excluding assets under construction related to strategic investment projects was 11.9 per cent (14.6).
- Cash flow from operations was EUR 298 million (626).
July–September 2016 (7–9/2015)
- Sales were EUR 1,143 million (EUR 1,225 million).
- Operating result was EUR 107 million (142). Comparable operating result was EUR 103 million (149).
- Result before taxes was EUR 89 million (121). Comparable result before taxes was EUR 85 million (128).
- Comparable return on capital employed was 9.8 per cent (14.6). Comparable return on capital employed excluding assets under construction related to strategic investment projects was 11.1 per cent (15.1).
- Cash flow from operations was EUR 177 million (293).
Events during the third quarter of 2016
- At the end of September, the bioproduct mill project was nearly 75 per cent complete.
- The market price of long-fibre pulp increased by 2 per cent. The price of short-fibre pulp fell by 3 per cent.
- Delivery volumes of Kerto ® LVL continued to grow strongly in Australia and North America.
- Metsä Board's production of uncoated fine paper ended in July.
- Metsä Board's wallpaper base machine PM3 at the Kyro mill was closed down in September.
- Metsä Group announced that its sawmills in Finland will transfer from Metsä Wood to Metsä Fibre through an internal group transaction on 1 November 2016.
Profit guidance for October–December 2016
Metsä Group’s comparable operating result is in the last quarter of 2016 expected to be roughly at a similar level as in the third quarter of 2016.
President and CEO Kari Jordan:
“Compared to the previous year, Metsä Group's profitability in 2016 was impacted by the lower market price of pulp and the start-up phase of Husum's new folding boxboard machine However, this year too we have surpassed the 10 per cent target we have set for comparable return on capital employed.
Husum's paperboard production has been determinedly increased in accordance with our plan. The new folding boxboard machine is already running at close to full capacity. The construction work on the new extrusion coating line, set to start up next year, has progressed according to plan.
The bioproduct mill under construction in Äänekoski is almost three quarters complete. We have made good progress, on schedule and within the budget. Test runs in the departments that will be completed first will begin the first quarter, and the entire mill will start up in the third quarter of 2017.
The approximately EUR 100 million development programme in our Wood Products Industry is likewise progressing in line with our objectives. The expansion of Lohja's Kerto ® LVL mill has begun. The development programme includes investments in both Finland and Estonia, and it will be implemented by the end of 2018.
Metsä Group is investing heavily in the growth of its core businesses. Resource-efficient processing into products creates the most added value for Finnish wood. It serves as an excellent starting point for the circular economy.”
Key figures
| 2016 | 2015 | 2016 | 2015 | 2015 | |
| Condensed income statement, EUR million | 1–9 | 1–9 | 7–9 | 7–9 | 1–12 |
| Sales | 3 482.7 | 3 810.6 | 1 143.3 | 1 225.2 | 5 016.0 |
| Other operating income | 52.3 | 78.8 | 27.1 | 10.6 | 95.7 |
| Operating expenses | -3 011.6 | -3 277.5 | -998.0 | -1 032.4 | -4 311.4 |
| Depreciation and impairment losses | -190.8 | -197.9 | -65.0 | -61.4 | -258.2 |
| Operating result | 332.7 | 413.9 | 107.4 | 142.0 | 542.1 |
| Share of results from associated companies and joint ventures | -1.4 | 8.5 | -0.5 | -0.8 | 11.2 |
| Exchange gains and losses | 0.8 | -3.8 | 1.3 | -0.6 | -1.2 |
| Other net financial items | -56.5 | -63.7 | -18.7 | -20.0 | -83.8 |
| Result before income tax | 275.5 | 355.0 | 89.5 | 120.7 | 468.4 |
| Income tax | -63.8 | -91.4 | -21.7 | -38.4 | -112.6 |
| Result for the period | 211.7 | 263.6 | 67.8 | 82.3 | 355.7 |
| 2016 | 2015 | 2016 | 2015 | 2015 | |
| Profitability | 1–9 | 1–9 | 7–9 | 7–9 | 1–12 |
| Operating result, EUR million | 332.7 | 413.9 | 107.4 | 142.0 | 542.1 |
| Comparable operating result | 332.1 | 414.7 | 102.8 | 149.0 | 537.4 |
| % of sales | 9.5 | 10.9 | 9.0 | 12.2 | 10.7 |
| Return on capital employed, % | 10.6 | 14.2 | 10.2 | 13.9 | 13.7 |
| Comparable return on capital employed | 10.5 | 14.2 | 9.8 | 14.6 | 13.6 |
| Return on equity, % | 11.5 | 16.0 | 10.9 | 14.2 | 15.9 |
| Comparable return on equity | 11.5 | 16.2 | 10.2 | 15.4 | 15.8 |
| 2016 | 2015 | 2016 | 2015 | 2015 | |
| Financial position | 30.9. | 30.9. | 30.6. | 30.6. | 31.12. |
| Equity ratio, % | 44.0 | 42.7 | 44.8 | 41.9 | 43.2 |
| Net gearing ratio, % | 40 | 29 | 38 | 34 | 25 |
| Interest-bearing net liabilities, EUR million | 991 | 682 | 945 | 779 | 610 |
SEGMENTS
| Sales and Operating result 1–9/2016, EUR million | Wood Supply and Forest Services | Wood Products Industry | Pulp Industry | Paperboard Industry | Tissue and Cooking Papers |
| Sales | 1 135.2 | 631.6 | 962.9 | 1 298.5 | 741.6 |
| Other operating income | 5.4 | 7.0 | 20.5 | 28.6 | 2.5 |
| Operating expenses | -1 116.0 | -594.4 | -762.0 | -1 151.5 | -670.0 |
| Depreciation and impairment losses | -2.5 | -23.3 | -44.9 | -81.9 | -29.7 |
| Operating result | 22.0 | 20.9 | 176.6 | 93.8 | 44.5 |
| Items affecting comparability | - | 5.5 | -11.7 | 10.9 | -2.0 |
| Comparable operating result | 22.0 | 26.4 | 164.9 | 104.7 | 42.5 |
| % of sales | 1.9 | 4.2 | 17.1 | 8.1 | 5.7 |
From Q3 2016 Metsä Group has relabeled the previously referenced “excluding non-recurring items” non-IFRS financial measures with “comparable” performance measures.
Near-term outlook
Wood demand will focus primarily on spruce logs, thinning sites to be harvested when the ground is unfrozen and, in terms of energy wood, on 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.
Competition in the wood products industry is intensifying as a result of new investments. In sawn timber, demand in Asia will support the market balance of spruce sawn timber, but the oversupply in pine sawn timber will continue. Demand for board products is expected to experience slight seasonal weakening. Construction in the UK market is expected to remain at a good level.
Global demand for pulp has remained stable, and there are no signs of considerable changes in market conditions. New capacity will enter the markets, but global demand for pulp is, correspondingly, expected to keep on growing. The capacity utilisation rates of Metsä Fibre's pulp mills are expected to be at a good level in the last quarter of the year.
Demand for high-quality fresh fibre paperboards is expected to remain good in both Europe and the Americas. Metsä Board's paperboard deliveries in October–December are expected to remained at the same level as in the previous quarter.
The increased capacity of European folding boxboard producers has not had a negative effect on the demand for and prices of Metsä Board's products. The market prices of folding boxboard and white fresh fibre linerboards are expected to remain fairly stable or increase slightly.
Metsä Board's fourth-quarter result will be weakened by the annual maintenance shutdown at the Husum integrated mill, which was extended by approximately a week due to the problems discovered in the pulp mill's recovery boiler.
In the tissue and cooking paper markets, demand is expected to continue to remain stable in all market areas. Demand for tissue paper is expected to increase particularly in eastern Central Europe, and demand for cooking papers is expected to grow in Asia.
Profit guidance for October–December 2016
Metsä Group’s comparable operating result is in the last quarter of 2016 expected to be roughly at a similar level as in the third quarter of 2016.
Espoo, Finland, 2 November 2016
BOARD OF DIRECTORS
For further information, please contact: Vesa-Pekka Takala, CFO, Metsä Group, tel. +358 10 465 4260 Juha Laine, SVP, Communications, Metsä Group, tel. +358 10 465 4541
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 is owned by approximately 116,000 Finnish forest owners.
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