Year 2018 was a good one for Metsä Board

In 2018 we continued to grow profitably, supported by strong market trends. Our comparable operating result improved by nearly a third and was EUR 252 million. Higher paperboard prices and the strong pulp market improved our profitability.

 Metsä Board's year 2018

 
 

Metsä Board's Annual Report consists of the annual review, the financial statements, the auditors’ report, the corporate governance statement and the salary and remuneration report.

   Key figures

 

      CEO's review

 
 

Market trends support fibrebased packaging solutions

Dear reader,
The year 2018 was a good one for Metsä Board, and we continued to grow profitably, supported by strong market trends. The growing responsibility for the environment experienced by consumers and brand owners, the search for alternatives to non-renewable packaging materials, increasing product safety requirements, urbanisation, and the growth of e-commerce are all increasing demand for ecological packaging materials. Our lightweight fresh fibre paperboards are an ideal solution for these needs. In cooperation with our customers, we develop new packaging solutions which enable the use of our lightweight, premium paperboards in innovative ways. All the wood raw material we use comes from sustainably managed northern forests, which guarantees the high and consistent quality of the fibre.

Focus on profitability
In recent years, our growth has clearly exceeded the average market growth. In the short term, our growth will be more modest, and our decisionmaking will be based on our profitability targets and the growth of shareholder value. Our profitability is based on superior cost efficiency and healthy sales prices driven by high-quality pulps and unique technical know-how. In 2018, our paperboard deliveries grew slightly from the previous year. Our comparable operating profit improved by nearly a third and was EUR 252 million. Higher paperboard prices and the strong pulp market improved our profitability. The production costs of paperboard increased, particularly due to the increased wood price and the acceleration of general cost inflation. Our comparable return on capital employed, 14.4%, exceeded our target level of more than 12%. Our balance sheet was strong, and the ratio of interest-bearing net debt to EBITDA was 1.0.

Sustainability is part of risk management
Sustainability is the core of our business, and responsible business operations are increasingly important to our customers and other stakeholders. In addition, sustainability is an important part of risk management, in mitigating the negative effects of climate change. We help our customers to reduce their fossil carbon dioxide emissions by offering them lightweight, sustainable and recyclable packaging materials. We also meet the other increasing requirements imposed on packaging. The origin of materials, the recyclability of packaging, product safety and purity are increasingly important, especially in food packaging. The EU Plastics Strategy and the planned restrictions on single-use plastic products challenge companies to develop alternatives that reduce the environmental impact. We continue to develop bio-based barrier solutions used especially in food and food service packaging and to evaluate their business opportunities. In early 2018, we launched a biodegradable and compostable eco-barrier paperboard. In 2018, we were once again recognised for our sustainability by third parties, such as CDP and EcoVadis. We also performed well in assessments concerning environmental issues, social responsibility and good governance, carried out by MSCI, ISS-oekom and Sustainalytics,among others.

Efficient production and highly skilled personnel increase our competitiveness

Raw materials, energy and water are used effectively in our production process, while reducing fossil carbon dioxide emissions. The production efficiency of our mills was at a good level in 2018, and nearly all of our production lines set new annual production records. By contrast, safety at work did not meet our targets. We will continue to develop our practices and guidelines further, in order to avoid all accidents. At the beginning of the year, our mills adopted the 5S method, developed on the basis of Lean thinking, aiming to increase productivity as well as safety and well-being at work. The new operating model is in use at all our mills, and we have received good feedback on it from our personnel and also achieved positive results.

Highly skilled and committed personnel play a key role in the retention of our leading market position and competitiveness. The values that guide our operating methods and management create a solid basis for our activities. The development of our personnel's know-how is a prerequisite for our success. We pay special attention to the availability and retention of competent personnel by means of various personnel development programmes and successor plans, and by investing in our employer image.

Continuous product development ensures our number one position

I am glad that we have a good reputation amongst our customers, and we are known particularly for the high and consistent quality of our products. According to customer feedback, it is the quality of our products that drives our customers to choose Metsä Board's paperboard. We want to keep on being our customers' number one choice, which is why we continue to develop our products and services. The progress made with the improved properties of BCTMP provide us with excellent opportunities to do so. In 2018, we also invested in the growth of the BCTMP capacity our Kaskinen mill.

The main targets of our research and development work are to continue the development of high-quality and lightweight folding boxboards and kraftliners, as well as to develop new products for the food service packaging segment. We work in close cooperation with international brand owners and converters to steer our R&D work in the right direction.

Market demand supports our growth

Global market trends are increasing the demand for fibre-based and lightweight packaging materials. The aim of replacing non-renewable materials with more ecological alternatives is also increasing demand for paperboard and pulp, on a global scale. Growing market demand and the price increases for paperboards in 2018 provide us with a good starting point for the coming year. Our objective is to distribute competitive dividends to our shareholders and maintain our strong financial position.

I would like to take this opportunity to extend my thanks for the past year to our customers, employees, shareholders and other stakeholders.

Mika Joukio
CEO

Highlights of 2018

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An eye-catching design packaging for liquorice

​This eye-catching packing with a luxurious, leather-like feel was the result of our design team’s work. Thanks to the smooth MetsäBoard Prime FBB 355 g/m2 paperboard, the package benefits from special laminate technologies and multi-layered embossing without any compromise on performance.

The liquorice maker Kouvolan Lakritsi sells these ecologically produced design packaging through its own webshop.

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An eco-barrier paperboard for food packaging

​A new extrusion coating line with an annual capacity of 100,000 tonnes started up at the Husum mill in Sweden in April. The value of the investment was EUR 38 million. The line serves the global food and food service packaging market with better product availability and competitive quality.

The line produces PE-coated paperboards that meet the strict requirements in terms of product safety, purity and the product’s protection. PE is the most widely used barrier against moisture and water in food and food service packaging.

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Investment in the kaskinen high-yield pulp mill

We invested in the production capacity for BCTMP at the Kaskinen mill. Together with the previously completed process changes, the investment improves the products’ quality
consistency and production reliability. The EUR 6 million investment increases the annual capacity by roughly 30,000 tonnes to 370,000 tonnes.

The new baling line was started up successfully towards the end of the year. We use the BCTMP produced at Kaskinen for the production of folding boxboard, and it is also sold as market pulp.

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new science based targets for the limitation of greenhouse gas emissions

Metsä Board is committed to a significant limitation of its fossil greenhouse gas emissions to combat climate change. The company submitted its ambitious proposal concerning emissions reduction targets to the Science Based Targets Initiative for official validation in late 2018.

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#betterwithless

Our packaging design competition, Better with Less – Design Challenge, inspired designers all over the world to develop more functional and environmentally friendly packaging solutions for daily consumer goods. The international jury selected “Stretching Inner Part”, a work by Iiro Numminen, as the winner from among more than 300 competition entries.

The structure of Numminen’s visually attractive design, made from paperboard, is fully scalable and suitable for a variety of product protection applications by offering a more ecological alternative to bubble wrap. This design offers great potential for numerous e-commerce packaging applications.

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Metsä board expands food security certification at its mills

Products used for food packaging and food service are subject
to a growing number of requirements. As the leading producer of fresh fibre paperboard, we want to ensure that our paperboards meet even the strictest purity and product safety requirements in demanding applications, such as direct contact with food.

In 2018, the product safety practices of our mills were developed further, and most of Metsä Board’s paperboard mills now apply the FSSC 22000 food safety management system. FSSC 22000, which meets the requirements of the Global Food Safety Initiative (GFSI), is internationally known and widely used in the food industry. External certification demonstrates our commitment to responsibility as well as the compliance of our products and production conditions with customer requirements.

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Better quality with strong fibre

​In May, Metsä Board achieved EcoVadis Gold rating for its sustainability practices. Metsä Board was rated among the top 1 per cent in all categories covered by EcoVadis’s supplier evaluation.

EcoVadis operates a reporting platform allowing companies globally to assess the environmental and social performance of its suppliers.

There are four assessment criteria: the environment, labour practices, sustainable purchasing and fair business practices.

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