A true paperboard company
The year 2016 was a historically significant one for Metsä Board. We brought the restructuring work, which had lasted for several years, to a conclusion when the last reel of fine paper was produced at the Husum mill in Sweden in July. In addition, the loss-making wallpaper base business at the Kyro mill in Kyröskoski, Finland, was discontinued.
From now on, we will focus on premium fresh fibre paperboard used in consumer goods, retail-ready and food service packaging, in line with our strategy. Metsä Board's profitability will continue to be based upon cost-effectiveness and healthy pricing, as well as high levels of fibre know-how and self-sufficiency. We will seek growth with our new folding boxboard capacity. A new folding boxboard production line started up at Husum at the beginning of the year. The 400,000- tonne annual capacity of this line will be marketed primarily to the Americas and for food service packaging globally. The demand for our lightweight paperboard made from fresh fibres has been strong in recent years, and with the new capacity we are able to meet this demand.
NEW FOLDING BOXBOARD PRODUCTION LINE STARTED UP
In 2016, Metsä Board's paperboard deliveries grew by 12 per cent from the previous year, which corresponds to our average annual growth target. Global demand for packaging materials made from fresh fibre is growing by approximately 3–4 per cent a year, meaning that our growth is clearly above the average market growth.
The rapid decline of the paper business was visible in our sales, and our profitability was burdened by the start-up of Husum's new production line for folding boxboard. By the end of the year, the average order price of the new folding boxboard was already at a good level. However, due to the long supply chain and time-consuming customer approvals, the positive impact on results was postponed. The profit development of the Finnish mills was stable overall.
The market prices of short- and long-fibre pulps fell compared to the previous year, but the overall impact of pulps on the company's result was still clearly positive. Large-scale investments and an increase in working capital turned our cash flow negative in the first half of the year. The situation nevertheless normalised in the second half of the year. Our balance sheet remained strong throughout the year.
CUSTOMER-DRIVEN PRODUCT AND SERVICE DEVELOPMENT
Metsä Board invests strongly in product development. Our goal is to produce even lighter paperboards, without compromising on their strength and printing qualities. We are also expanding our selection of paperboards. In 2016, we introduced PE-coated paperboards suitable for food service packaging to the market with the help of external partners. In 2017, we will have our own extrusion coating line for PE-coated products. We are also developing other barrier solutions against moisture and grease for food service packaging, and we will closely monitor their commercial feasibility in the future.
Over the decades, we have created long-term customer relationships based on trust and well-functioning cooperation. We develop our products and services in cooperation with our customers – brand owners, converters and merchants – by providing them with sustainable and functional packaging solutions. Our services include product consulting related to end uses, technical support for paperboard conversion, as well as design and development related to packaging. Our objective is to support and promote the sales of our customers' products, to create new growth opportunities for them, and to reduce the costs and environmental impact arising from packaging materials
LEADING POSITION IN SUSTAINABILITY
Sustainability and environmental responsibility are integral parts of our daily operations. The production of lightweight paperboards consumes less energy, water and raw material. They also generate less waste. Our main raw material – pure and safe fresh fibre – is fully traceable and mostly certified.
In 2016, we were once again recognised by CDP for our responsible use of water, and our actions and strategy to combat climate change. We were also awarded Leadership status in Forest programme. These recognitions prove that the responsibility of our business operations is among the very best internationally.
Well-being at work and occupational safety are also key factors in our success. In 2016, we implemented a project to speed up the improvement of occupational safety and the harmonisation of occupational safety standards at our mills. Our long-term work is bearing fruit – our accident frequency rate has declined year by year. The objective of supervisor coaching is to harmonise operating methods and to increase fair leadership that supports growth. Quality supervisory work and management culture play a central role in our pursuit of growth.
SETTING OUR SIGHTS ON THE FUTURE
Metsä Board's vision is to be the preferred supplier of premium paperboards, creating value for customers globally. We have successfully implemented years of restructuring work from a paper company to a paperboard company, and our new capacity meets the growing demand for paperboard made from fresh fibre globally. In 2017, our goal is to continue profitable growth with our new production capacity. At the same time, we are setting our sights on the future and continuously developing our operations to correspond with the demand and needs of the packaging market.
I would like to extend my warmest thanks to our customers, employees, shareholders and other stakeholders for the past year.