Metsä Group, Half year financial report, January-June 2016

1. Metsä Group
Half year financial report
January–June 2016
Kari Jordan
President and CEO
4.8.2016

2. • Sales EUR 2,339 million (1–6/2016: 2,585 million)
• Operating result* EUR 229 million (266 million)
• Operating result* 9.8% (10.3%) of sales
• Return on capital employed* 11.0% (13.7%)
• Operating result compared to previous year was affected by
lower market price of pulp and start-up phase of new folding
boxboard production line at Metsä Board’s Husum mill
4.8.20162
Business developed as expected
Metsä Group – Q2
*excluding non-recurring items

3. • Market price of long-fibre pulp increased by one per cent. Price of
short-fibre pulp decreased by 9 per cent
• Demand for paperboards remained stable in both Europe and the
Americas – price levels were stable
• Supply of wood was steady and stumpage prices remained stable
• Metsä Wood announced it will launch an investment programme
of approximately EUR 100 million in plywood and Kerto® LVL
products
• Metsä Group announced that its sawmills in Finland will be
transferred from Metsä Wood to Metsä Fibre
• Construction of bioproduct mill in Äänekoski proceeded as
planned
– Halfway point was reached in June
– Equipment installations began
– Workforce at end of June was 1,300 people
4.8.20163
Events in the second quarter
Metsä Group – Q2

4. 4.8.20164
Sales quarterly
Metsä Group – Q2
EUR million
1 264 1 242 1 214 1 219
1 254 1 265
1 204
1 248 1 255
1 330
1 225 1 205
1 156 1 184
0
200
400
600
800
1 000
1 200
1 400
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

5. 4.8.20165
Operating result
Metsä Group – Q2
EUR million
89
94
73
87
105
92
104
117
129
137
149
123
109
120
94
89
63
88
70
160
103
84
118
154
142
128
107
119
0
20
40
60
80
100
120
140
160
180
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16
excl. non-recurring items incl. non-recurring items

6. 4.8.20166
Operating result excl. non-recurring items
Metsä Group – Q2
EUR million
130
119
63
3
53
64 68 71
89
94
73
87
105
92
104
117
129
137
149
123
109
120
0
20
40
60
80
100
120
140
160
Q1/11
Q2/11
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
Q3/13
Q4/13
Q1/14
Q2/14
Q3/14
Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Q1/16
Q2/16
Q3/16
Q4/16

7. Change in operating result
4.8.20167
Metsä Group – Q2
EUR million
Operating result excl. non-recurring items 1–6/2015 266
Sales prices -127
Sales volumes -26
Exchange rates -9
Raw materials 15
Employee costs 18
Maintenance and other fixed costs 22
Change of inventories 24
Write-offs and others, total 46 -37
Operating result excl. non-recurring items 1–6/2016 229

8. Non-recurring items Q1–Q2/2016
8
Metsä Group – Q2
4.8.2016
EUR million Q1–Q2/2016
Operating result incl. non-recurring 225.3
Non-recurring items
Metsä Wood / Additional expenses related to divestment of
Metsä Wood France S.A.S.
-0.4
Metsä Board / Restructuring of Simpele paperboard mill -1.8
Metsä Board / Loss related to divestment of Alrec Boiler -1.1
Metsä Board / Organisation of Benelux sales office -0.7
Non-recurring items total -4.0
Operating result excl. non-recurring items 229,3

9. 9
ROCE, excluding non-recurring items
Metsä Group – Q2
%
Target>10%
4.8.2016
6.6
9.8
11.3
13.7
11.0
0
2
4
6
8
10
12
14
16
Q1–Q2/2012 Q1–Q2/2013 Q1–Q2/2014 Q1–Q2/2015 Q1–Q2/2016

10. 4.8.201610
Equity ratio
Metsä Group – Q2
%
34.7
37.9 37.9
43.2
44.8
0
5
10
15
20
25
30
35
40
45
50
12/2012 12/2013 12/2014 12/2015 6/2016

11. 11
Interest-bearing net liabilities
Metsä Group – Q2
EUR million
4.8.2016
1 609
1 510
938
610
945
0
250
500
750
1 000
1 250
1 500
1 750
2 000
12/2012 12/2013 12/2014 12/2015 6/2016

12. 12
Capital expenditure
Metsä Group – Q2
EUR million
4.8.2016
204 214
143
492
338
0
100
200
300
400
500
600
700
800
900
1–12/2012 1–12/2013 1–12/2014 1–12/2015 1–6/2016
Full year
estimate

13. Income statement
13
Metsä Group – Q2
EUR million Q1–Q2/2016 Q1–Q2/2015 Change
Sales 2 339.6 2 585.3 -245.8
Other operating income 25.2 68.2 -43.1
Operating expenses -2 013.6 -2 245.1 231.6
Depreciation and impairment losses -125.8 -136.5 10.7
Operating result 225.3 271.9 -46.6
Operating result exclunding non-recurring items 229.3 265.8 -36.5
Share of results from associated companies and joint ventures -0.9 9.3 -10.2
Exchange gains and losses -0.5 -3.2 2.7
Other net financial items -37.9 -43.7 5.8
Result before income tax 186.0 234.3 -48.3
4.8.2016

14. Key figures
14
Metsä Group – Q2
Q1–Q2/2016 Q1–Q2/2015 Change
ROCE, % 10.8 14.0 -3.2
excluding non-recurring items 11.0 13.7 -2.7
ROE, % 11.8 16.6 -4.8
excluding non-recurring items 12.1 16.3 -4.2
Equity ratio, % 44.8 41.9 2.9
Net gearing ratio, % 38 34 4
Interest-bearing net liabilities, EUR million 945 779 166
Investments, EUR million 338 140 198
Personnel at end of period 10 075 10 442 -367
4.8.2016

15. Cash Flow Statement I
15
Metsä Group – Q2
EUR million Q1–Q2/2016 Q1–Q2/2015
Cash flow from operating activities
Result for the period 143.9 181.3
Adjustments to result for the period 190.6 186.6
Interest received 1.7 2.0
Interest paid -30.1 -36.7
Dividends received 0.8 3.7
Taxes -75.7 -45.0
Other financial items, net 6.2 -13.0
Change in working capital -213.8 -34.9
Cash flow arising from investing activities 23.6 244.0
4.8.2016

16. Cash Flow Statement II
EUR million Q1–Q2/2016 Q1–Q2/2015
Net cash flow from operating activities 23.6 244.0
Purchase of shares 0.0 0.0
Investments -337.9 -140.2
Sales of assets and others 16.4 37.3
Changes in members' capital and in other capital 81.5 108.3
Interest on members' capital and dividends paid -120.2 -94.9
Change in long-term loans and committed facilities -31.3 -53.0
Change in cash and cash equivalents -367.9 101.4
Cash and cash equivalents at beginning of period 1 120.8 947.9
Translation differences and others 0.4 1.2
Change in cash and cash equivalents -367.9 101.4
Cash and cash equivalents at end of period 753.3 1 050.4
16
Metsä Group – Q2
4.8.2016

17. 17
Personnel
Metsä Group – Q2
4.8.2016
* Approximately 850 summer employees at end of June
11 447
10 736
10 410
9 599
10 075
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
12/2012 12/2013 12/2014 12/2015 6/2016*

18. Wood Supply and
Forest Services

19. Wood Supply and Forest Services
19
Metsä Forest – Wood Supply and Forest Services
EUR million Q1–Q2/2016 Q1–Q2/2015 Change
Sales 779.0 805.2 -26.2
Other operating income 3.7 4.5 -0.8
Operating expenses -766.6 -792.3 25.7
Depreciation and impairment losses -1.7 -1.8 0.1
Operating result 14.3 15.6 -1.3
Non-recurring items, total - - -
Operating result excluding non-recurring items 14.3 15.6 -1.3
% of sales 1.8 1.9 -0.1
4.8.2016

20. Popularity of electronic services increases
• Supply of wood was steady and stumpage
prices remained stable
• Metsä Forest delivered a total of 15.7 million
cubic metres of wood (15.9)
• Wood was harvested as targeted and deliveries
to customers' production units were carried out
as planned
• Sales of forest management services continued
strong and increased by 20 per cent compared
to corresponding period last year
• Nearly 20% of wood acquired from private
forests was purchased electronically
• Nearly 30% of forest management services was
sold electronically
20
Operating result excl. non-recurring items
EUR million
Metsä Forest – Wood Supply and Forest Services
4.8.2016
8.6
7.0
4.5
8.1
8.7
6.9 7.0
6.3
7.8
6.5
0
1
2
3
4
5
6
7
8
9
10
Q1/14
Q2/14
Q3/14
Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Q1/16
Q2/16
Q3/16
Q4/16

21. Wood Products
Industry

22. Wood Products Industry
22
Metsä Wood – Wood Products Industry
EUR million Q1–Q2/2016 Q1–Q2/2015 Change
Sales 437.9 452.2 -14.3
Other operating income 5.2 2.2 -3.0
Operating expenses -411.3 -441.8 30.5
Depreciation and impairment losses -17.1 -16.9 -0.2
Operating result 14.7 -4.3 19.0
Non-recurring items, total 5.5 22.3 -16.8
Operating result excluding non-recurring items 20.2 18.0 2.2
% of sales 4.6 4.0 0.6
4.8.2016

23. Growth in delivery volumes of Kerto® LVL products
• Deliveries of sawn spruce and pine timber to
North Africa and deliveries of sawn spruce
timber to Asia increased
• Delivery volumes of Kerto® LVL products
grew in particular to Australia and North
America
• ThermoWood business was divested to Oy
Lunawood Ltd.
• In June, launch an investment programme
of approximately EUR 100 million relating to
the Kerto® LVL and plywood operations was
announced
• Transfer of Finnish sawmills to Metsä Fibre
was announced in June
23
Operating result excl. non-recurring items
EUR million
Metsä Wood – Wood Products Industry
4.8.2016
8.6
14.4
6.2
8.0 7.9
10.2
5.9
7.5
5.8
14.4
0
2
4
6
8
10
12
14
16
Q1/14
Q2/14
Q3/14
Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Q1/16
Q2/16
Q3/16
Q4/16

24. Pulp Industry

25. Pulp Industry
25
Metsä Fibre – Pulp Industry
EUR million Q1–Q2/2016 Q1–Q2/2015 Change
Sales 648.9 721.5 -72.6
Other operating income 5.7 10.3 -4.6
Operating expenses -503.6 -525.1 21.5
Depreciation and impairment losses -35.3 -35.5 0.2
Operating result 115.7 171.1 -55.5
Non-recurring items, total - - -
Operating result excluding non-recurring items 115.7 171.1 -55.5
% of sales 17.8 23.7 -5.9
4.8.2016

26. Metsä Group26
Price of pulp (PIX) 2008–Q2/2016
Metsä Fibre – Pulp Industry
USD EUR
Source: FOEX Indexes Ltd
4.8.2016
350
450
550
650
750
850
950
1050
350
450
550
650
750
850
950
1050
'08 ´09 ´10 ´11 ´12 ´13 ´14 ´15 ´16
Hardwood/EUR Softwood/EUR Hardwood/USD Softwood/USD

27. Currency-denominated market prices of pulp on a
lower level than previous year
• Currency-denominated market prices of long-
fibre pulp decreased 10% and of short-fibre
pulp 5% from corresponding period previous
year
• Price of long-fibre pulp in Europe was USD
794 per tonne at the beginning of January
and USD 806 at end of review period
• Price of short-fibre pulp was USD 781 and
USD 680, respectively
• Transfer of Finnish sawmills to Metsä Fibre
was announced in June to utilise the
industrial synergies even better
Metsä Group27
Operating result excl. non-recurring items
EUR million
Metsä Fibre – Pulp Industry
54.9
36.3
51.8
64.5
78.7
92.5
85.5
80.5
63.7
0
10
20
30
40
50
60
70
80
90
100
Q1/14
Q2/14
Q3/14
Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Q1/16
Q2/16
Q3/16
Q4/16
4.8.2016

28. Paperboard Industry

29. Paperboard Industry
29
Metsä Board – Paperboard Industry
EUR million Q1–Q2/2016 Q1–Q2/2015 Change
Sales 858.5 1 047.7 -189.2
Other operating income 14.3 31.8 -17.5
Operating expenses -757.7 -916.9 159.2
Depreciation and impairment losses -48.0 -52.3 4.3
Operating result 67.2 110.3 -43.1
Non-recurring items, total 3.6 -20.1 23.7
Operating result excluding non-recurring items 70.8 90.2 -19.4
% of sales 8.2 8.6 -0.4
4.8.2016

30. 30
Prices of folding boxboard and white top krafliner
in Europe
Metsä Board – Paperboard Industry
EUR/tonne
Sources: Pöyry Management Consulting
and FOEX Indexes Ltd.
4.8.2016
600
650
700
750
800
850
900
950
1000
1050
1100
2010 2011 2012 2013 2014 2015 2016
Folding boxboard White top kraftliner

31. Start-up of Husum’s new folding boxboard
production line affected result development
• Total delivery volume of folding boxboard
and white fresh forest fibre linerboard
increased 11% compared with
corresponding period previous year
• Sales were reduced considerable decrease
in paper deliveries
– Paper production at Husum ended in July
• Operating result was weakened by start-up
of Husum’s new paperboard production line
and lower average price of start-up
volumes, as well as fluctuations in pulp
prices
• Wallpaper base machine at Kyro mill is
planned to be closed
31
Operating result excl. non-recurring items
EUR million
Metsä Board – Paperboard Industry
4.8.2016
36.1
28.3
35.2
36.9
43.2
47.0
54,6
35.1 35.0 35.8
0,0
10,0
20,0
30,0
40,0
50,0
60,0
Q1/14
Q2/14
Q3/14
Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Q1/16
Q2/16
Q3/16
Q4/16

32. Tissue and
Cooking papers

33. Tissue and Cooking Papers
33
Metsä Tissue – Tissue and Cooking Papers
EUR million Q1–Q2/2016 Q1–Q2/2015 Change
Sales 495.1 502.7 -7.6
Other operating income 1.6 2.3 -0.7
Operating expenses -450.1 -472.4 22.3
Depreciation and impairment losses -19.8 -21.4 1.6
Operating result 26.7 11.2 15.5
Non-recurring items, total - 12.1 -12.1
Operating result excluding non-recurring items 26.7 23.4 3.4
% of sales 5.4 4.6 0.8
4.8.2016

34. Improved sales mix and lower costs increased
operating result from previous year
• Reduction in sales was primarily due to
decrease in sales volumes, which was still
affected by phasing out of tissue paper
operations in Russia
• Also weakening of exchange rates of
Norwegian krone, Polish zloty and British
pound reduced sales
• Sales mix improved and costs of energy and
transport were lower than in previous year
• Paper machine at the Raubach mill was
renewed
34
Operating result excl. non-recurring items
EUR million
Metsä Tissue – Tissue and Cooking Papers
4.8.2016
11.8
9.7
19.6
21.1
15.8
7.6
13.2
18.6
13.5 13.2
0,0
5,0
10,0
15,0
20,0
25,0
Q1/14
Q2/14
Q3/14
Q4/14
Q1/15
Q2/15
Q3/15
Q4/15
Q1/16
Q2/16
Q3/16
Q4/16

35. Summary

36. Outlook for the business areas 1/2
Wood Supply and Forest Services
• Wood demand will target felling sites to be harvested when the ground is unfrozen and, in terms of energy
wood, crown wood
• Uncertainties related to Act on the Financing of Sustainable Forestry will have a negative impact on
demand for forest management services
Wood Products Industry
• Market balance and sales prices of sawn timber are expected to improve as a whole
• Market situation in Northern Africa will create uncertainty in demand for pine sawn timber and demand in
Chinese market is expected to quiet down seasonally
• Lively demand for Kerto® LVL wood products is expected to continue
• Competition in plywood products is expected to remain tense
Pulp
• Moderate demand growth for long-fibre pulp is expected to continue globally
• Annual maintenance shutdowns of two of Metsä Fibre’s pulp mills are scheduled for third quarter
36
Summary
4.8.2016

37. Outlook for the business areas 2/2
Paperboard
• Demand for paperboard is expected to remain stable in both Europe and America
• Paperboard deliveries are expected to grow in July–September from second quarter of 2016
• Market prices of folding boxboard and white fresh forest fibre linerboard are expected to remain stable or
increase slightly
• Metsä Board has announced increase in the price of white fresh forest fibre linerboard and folding boxboard
in Europe
• Result development will be affected by start-up volumes of folding boxboard at Husum, which reduce
average price of folding boxboard
Tissue and Cooking papers
• In 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 particular in eastern Central Europe and for cooking
papers demand is expected to increase in Asia
37
Summary
4.8.2016

38. • Metsä Group’s operating result
excluding non-recurring items is in
the third quarter of 2016 expected
to be slightly weaker than in the
second quarter of 2016
4.8.201638
Near-term outlook
Summary