Metsä Group Interim Report 1–3/2014 Stock Exchange Release 13 May 2014 at noon EET
Result for January–March 2014
– Sales amounted to EUR 1,254 million (1–3/2013: EUR 1,264 million).
– Operating result excluding non-recurring items was EUR 105 million (89). Operating result including non-recurring items was EUR 70 million (94).
– Result before taxes excluding non-recurring items was EUR 80 million (57). Result before taxes including non-recurring items was EUR 37 million (62).
– Return on capital employed excluding non-recurring items was 12.3 per cent (9.7).
– Cash flow from operations amounted to EUR -32 million (-19).
Events during January–March 2014
– The USD-denominated price of softwood pulp continued to increase in all markets and was higher than in the corresponding period in the previous year.
– There were no material changes in the prices of paperboards and papers compared to the previous quarter but prices were slightly lower than in the corresponding period last year.
– The profitability of the wood products industry improved as a result of increased sales prices and the implemented efficiency programmes.
– Metsä Board issued a EUR 225 million unsecured bond and signed a new unsecured credit agreement for EUR 250 million.
– Metsäliitto Cooperative increased its shareholding in Metsä Tissue with a share transaction completed on 15 January 2014, after which Metsäliitto Cooperative owns 91 per cent of Metsä Tissue.
– Metsä Board sold the real estate property in the Lielahti area of Tampere, Finland, to the City of Tampere for approximately EUR 26 million.
– The arbitration proceedings related to Metsä Fibre's shareholder agreement were completed, and Metsä Group was ordered to pay a total of EUR 67 million in fines.
Events after the period
– In April, Metsä Fibre sold a total of 170,000 Pohjolan Voima Oy's B shares to Kymppivoima Oy for EUR 75 million.
– Metsä Group announced in April that it is planning the construction of a bioproduct mill in the existing pulp mill area in Äänekoski, Finland. Should the project materialise, the mill with a cost of approximately EUR 1.1 billion, would be the largest ever investment in the history of the forest industry in Finland. The bioproduct mill is planned to be operational in 2017. The mill's annual pulp production capacity would be 1.3 million tonnes.
“As expected, the Group's operating result in January–March improved compared to the previous quarter. The improvement was boosted by the increase in the sales prices of Metsä Wood's products and the efficiency programmes implemented, the positive development in pulp prices, as well as the increased delivery volumes of folding boxboard and white-top fresh forest fibre linerboard.
Northern, renewable wood is an excellent raw material for ecological, recyclable products. Our plan to build a next generation bioproduct mill in Äänekoski is proof of our strong trust in our strategy, which is based on focusing on operations with good growth outlook and in which we have a clear competitive edge.
The economy in Europe and in Finland is still functioning in low gear, and markets are active primarily in the USA and Far East. Now we need policy-making which puts the competitiveness of European industry first. The government must effectively promote the interests of Finnish basic industry.”
Kari Jordan, President & CEO, Metsä Group
Metsä Group
| Income statement, EUR million The figures for 2013 are restated | 2014 1–3 | 2013 1–3 | 2013 1–12 |
| Sales | 1 254.3 | 1 263.6 | 4 938.7 |
| Other operating income | 36.1 | 16.0 | 81.0 |
| Operating expenses | -1 152.5 | -1 115.3 | -4 427.7 |
| Depreciation and impairment losses | -68.2 | -69.8 | -257.1 |
| Operating result | 69.7 | 94.5 | 335.0 |
| Share of results from associated | |||
| companies and joint ventures | 7.4 | 6.6 | 9.6 |
| Exchange gains and losses | -2.1 | 0.2 | -4.6 |
| Other net financial items | -37.8 | -38.9 | -116.2 |
| Result before income tax | 37.2 | 62.4 | 223.8 |
| Income taxes | -5.4 | -16.0 | -35.1 |
| Result for the period | 31.8 | 46.4 | 188.7 |
| Profitability The figures for 2013 are restated | 2014 1–3 | 2013 1–3 | 2013 1–12 |
| Operating result, EUR mill. | 69.7 | 94.5 | 335.0 |
| - “ -, excluding non-recurring items | 105.1 | 89.3 | 342.9 |
| - “ - % of sales | 8.4 | 7.1 | 6.9 |
| Return on capital employed, % | 8.0 | 10.2 | 8.9 |
| - ” -, excluding non-recurring items | 12.3 | 9.7 | 9.1 |
| Return on equity, % | 6.5 | 9.9 | 9.9 |
| - ” -, excluding non-recurring items | 15.4 | 8.8 | 10.3 |
| Financial position The figures for 2013 are restated | 2014 31.3. | 2013 31.3. | 2013 31.12. |
| Equity ratio, % | 37.2 | 34.9 | 37.9 |
| Net gearing ratio, % | 83 | 90 | 77 |
| Interest-bearing net liabilities, EUR mill. | 1 614 | 1 695 | 1 510 |
Segments
| Sales and Operating result January–March 2014 (EUR mill.) | Wood Supply and Forest Services | Wood Products Industry | Pulp Industry | Paperboard and Paper Industry | Tissue and Cooking Papers |
| Sales | 434.9 | 221.9 | 329.0 | 501.2 | 252.6 |
| Other operating income | 1.3 | 1.1 | 2.9 | 32.8 | 1.5 |
| Operating expenses | -426.8 | -207.6 | -256.1 | -464.8 | -232.7 |
| Depreciation & impairment losses | -0.7 | -7.7 | -20.8 | -25.7 | -9.5 |
| Operating result | 8.6 | 7.7 | 54.9 | 43.5 | 11.8 |
| Non-recurring items | - | 1.0 | - | -7.4 | - |
| Operating result, excl. non-rec. items | 8.6 | 8.6 | 54.9 | 36.1 | 11.8 |
| - % of sales | 2.0 | 3.9 | 16.7 | 7.2 | 4.7 |
Near-term outlook
In Finland, wood procurement will focus on renewal stands and thinning stands harvestable in the summer. Metsä Forest will also buy delivery wood directly from forest owners mainly for autumn deliveries.
Sales in the wood products industry is expected to grow in the second quarter compared to the previous quarter. Demand and supply of wood products are reasonably balanced, and the balance of the demand and supply of birch plywood is good. Estimating the demand for spruce sawn timber in the remainder of the year is difficult.
Demand for pulp is expected to continue to grow, and demand and supply of softwood pulp are expected to be balanced in the coming months as well. The annual maintenance shutdown of Metsä Fibre's Äänekoski mill and the shutdown of the Joutseno mill, which is longer than normal due to renewal investments, will take place in the second quarter. The shutdowns are estimated to cause production cuts of approximately 50,000 tonnes. The utilisation rates of the other pulp mills are expected to remain at a good level in the second quarter.
Delivery volumes of folding boxboard are expected to increase slightly during the second quarter of 2014 compared to the previous quarter. Delivery volumes of white-top fresh forest fibre linerboard is estimated to be approximately at the previous quarter's level. The average price of folding boxboard is estimated to increase slightly in the second quarter as a result of the price increases implemented at the end of last year. Metsä Board has announced that it will increase the prices of white-top fresh forest fibre liners in Europe.
Delivery volumes of uncoated fine paper are expected to decrease slightly in the second quarter of 2014 compared to the previous quarter, and delivery volumes of coated papers are expected to be at the previous quarter's level. Metsä Board has announced that it will increase the prices of uncoated fine paper in Europe. No material changes are in sight in the prices of coated papers.
The planned annual maintenance shutdown will be carried out at the Husum mill in Sweden in the second quarter.
In the tissue paper market, demand is expected to continue to be stable in all market areas and to grow in Eastern Central Europe.
Metsä Group’s operating result excluding non-recurring items in the second quarter of 2014 is expected to be slightly weaker compared to the first quarter of the year.
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–March 2014 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
Reeta Kaukiainen, SVP, Communications, Metsä Group, tel. +358 (0)10 465 4541, +358 (0)50 522 0924
www.metsagroup.com
Metsä Group is a responsible forest industry group whose products’ main raw material is renewable and sustainably grown northern wood. Metsä Group focuses on tissue and cooking papers, consumer packaging 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 4.9 billion in 2013, and it employs approximately 11,000 people. The Group operates in some 30 countries. Metsäliitto Cooperative is the parent company of Metsä Group and is owned by approximately 123,000 Finnish forest owners.