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Metsä Board Oyj

12/01/2020 | Press release | Distributed by Public on 12/01/2020 03:12

Metsä Board to release capital from its pulp business and to focus on growth in paperboard

Metsä Board Corporation Stock exchange release 1 December 2020 at 11 a.m. EET

Metsä Board, part of Metsä Group, has on 1 December 2020 signed an agreement to sell a 30 percent stake in its Husum pulp mill in Sweden. The buyer is the Swedish forest owners' cooperative (ekonomisk förening) Norra Skog, with whom Metsä Forest Sverige, responsible for Metsä Board's wood procurement in Sweden, has simultaneously entered into a long-term wood supply agreement.

Investment decision for the first phase of the Husum pulp mill renewal

The amendment to the environmental permit for the Husum mill has been approved, and Metsä Board has made the final investment decision on the first phase of the pulp mill renewal. The first phase of the investment includes a new recovery boiler and turbine and its total value is approximately EUR 320 million. Expected start-up for the new recovery boiler and turbine will be in H1 2022.

The main terms of the transaction with Norra Skog

The valuation of the Husum pulp mill (enterprise value) to be applied in the transaction at the time of closing is approximately EUR 875 million, including the completion of the ongoing recovery boiler and turbine investment. The valuation corresponds to a value of approximately EUR 1.2 billion after the completion of the second phase of the pulp mill renewal, i.e. the new fibre line. The transaction will decrease Metsä Board's net debt by approximately EUR 260 million at the time of closing, and additionally reduce Metsä Board's financial contribution in the second phase of the pulp mill renewal by approximately EUR 100 million. The closing of the transaction is expected to be in January 2021.

Impacts on wood supply

The long-term wood supply agreement between the parties will increase the share of certified wood procured from Sweden and substantially reduce wood imported from the Baltic countries. The increased share of the wood procured from Sweden will reduce the mill's cost volatility. In addition, the cooperation with Norra Skog further strengthens the Husum pulp mill's wood availability and hence makes the mill an excellent platform for further development of Metsä Board's paperboard business.

Impacts on the company's self-sufficiency in pulp and financial reporting

Prior to the transaction, Metsä Board's net surplus in pulp is approximately 600,000 tonnes per year. The net surplus consists of the difference between Metsä Board's own pulp production and consumption and a 24.9 percent holding in its associated company Metsä Fibre. Norra Skog's 30 percent minority stake in the Husum pulp mill will reduce Metsä Board's annual net surplus in pulp by approximately 210,000 tonnes. Metsä Board will continue to consolidate the Husum pulp mill in its consolidated financial statements as a subsidiary, so the sensitivity of operating result to changes in pulp market prices will remain unchanged. A 10 percent increase (decrease) in the market pulp price will have a positive (negative) impact of approximately EUR 30 million annually on the company's operating result. The capital gain from the transaction will be reflected directly in the group's equity and no impacts will be reported in the income statement. The gain from the share sale transaction is tax free.

The transaction accelerates the development of Metsä Board's paperboard business

Metsä Board's strategy is to continue profitable growth in fresh fibre-based packaging materials. The cash released by the transaction and the avoided future investments, totalling more than EUR 350 million, will enable significant reallocation of the company's development investments to paperboard. The company has prepared investments aimed at improving the profitability and growth of its paperboard business. Now the company is in the position to accelerate project planning towards decision-making. The planned projects aim at organic growth, developing the product offering, and improving the cost efficiency.

'With this transaction between Metsä Board and Norra Skog, we will ensure the wood supply of the Husum mill far into the future and get a partner to share the investments related to the renewal of the pulp mill. At the time of closing of the transaction Metsä Board is practically a net debt-free company. This provides an excellent platform to grow our core business - sustainable and high-quality fresh fibre paperboard,' says CEO Mika Joukio.

Webcast presentation and conference call

The company will hold a webcast presentation and conference call in English for analysts, investors and media today, 1 December 2020, at 1:00 p.m. EET. Mika Joukio, CEO, and Jussi Noponen, CFO, will go through the arrangement and its impacts on Metsä Board, after which participants will have the opportunity to ask questions. A link to the webcast presentation: https://metsaboard.videosync.fi/2020-1201-info

Conference call participants are requested to call in and register a few minutes prior to the start of the call on the following numbers. By dial in to the conference call, the participant agrees that personal information such as name and company name will be collected.

Finland: +358 9817 10310
Sweden: +46 8566 42651
United Kingdom: +44 3333 000804
Germany: +49 69138 03430
United States: +1 6319 131422

The conference call PIN: 90510330#

METSÄ BOARD CORPORATION

Further information:

Finnish and international media: Mika Joukio, CEO, tel. +358 10 465 4300

Swedish media: Olov Winblad von Walter, Mill manager, Husum mill, tel. +46 70 317 81 11

Analysts and investors: Jussi Noponen, CFO, tel. +358 10 465 4913 and Katri Sundström, Vice President, Investor relations, tel. +358 10 462 0101

Metsä Board

www.metsaboard.com

Metsä Board is a leading European producer of premium fresh fibre paperboards and forerunner in sustainability. We produce premium lightweight folding boxboards, food service boards and white kraftliners for consumer goods packaging as well as retail-ready and food service applications. We work together with our customers on a global scale to innovate solutions for better consumer experiences with less environmental impact. The pure fresh fibres Metsä Board uses are a renewable resource, traceable to origin in sustainably managed northern forests. We aim for completely fossil free mills and raw materials by 2030.

The global sales network of Metsä Board supports customers worldwide, including brand owners, retailers, converters and merchants. In 2019, the company's sales totalled EUR 1.9 billion, and it has approximately 2,400 employees. Metsä Board, part of Metsä Group, is listed on the Nasdaq Helsinki.

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