CEO Mika Joukio's review

CEO's review

Metsä Board's CEO Mika Joukio comments on the performance of the company.

Comment on  Interim Report JanuarySeptember 2018 

“Profitability in the third quarter improved due to the increased average prices of folding boxboard, white kraftliner and market pulp. The average price of paperboard rose due to successful price increases and the optimisation of the sales mix. The pulp market remained strong and the increased production and delivery volumes of pulp improved the result of our associated company Metsä Fibre.
Our paperboard deliveries were at a record-high level during the first half of the year and particularly during the second quarter. We estimate the high delivery volumes during the first half of the year to have increased customers’ stocks, which had an effect on our delivery volumes during the third quarter. The changes in the delivery volumes of market pulp were mainly due to theincrease in our own pulp consumption from growing paperboard production at the Husum mill in Sweden.
Exchange rate fluctuations during the third quarter had the expected negative effect on results compared to other quarters this year. Planned maintenance shutdowns were held at the Kemi integrated mill and partly at the Husum integrated mill. The maintenance shutdowns’ effect on results was at the same level as in the previous quarter.
Wood costs remained fairly stable compared to the previous quarter, but the result continues to be burdened by the expensive imported wood purchased for the Husum mill. General cost inflation has been rapid this year, in addition to which transport costs in the United States have increased. Recently, however, cost inflation has slowed down, and we do not expect significant changes to our production costs in the near future.
Growing concern over the use of non-renewable natural resources and ensuring product safety particularly in food packaging increase demand for ecological and lightweight fresh fibre paperboard. In addition, sustainability and actions against climate change are increasingly important prerequisites for operations and competitive factors for companies. Thanks to long-term work, the energy efficiency of Metsä Board’s production has improved year after year. Fossil-based carbon dioxide emissions and water consumption have been reduced to a significant degree. Our sustainable way of working has won plenty of external recognition, of which I am particularly proud. The thanks for these achievements belongs not only to our competent and committed personnel, but our customers, for whom a responsible way of working has been an important starting point and requirement for cooperation for many years now. Our goal is to continue this development in the future.”

 

Review in the 2017 Annual report

 
 

Target is to continue profitable growth

Dear reader,
After completing the restructuring, 2017 was Metsä Board’s first full year as a pure-play paperboard company. In line with our strategy, we are focusing on the production of premium lightweight fresh fibre paperboards. Through Husum mill’s new folding boxboard capacity, we are well positioned to meet the growing global demand for fresh fibre paperboards. In 2017, our total paperboard deliveries grew from the previous year, and our profitability improved markedly.

Megatrends support growing demand for fresh fibre paperboard
Demand for packaging materials made from fresh fibre paperboard is supported by strong megatrends, such as population growth and urbanisation, as well as the increasing requirements for recyclable, resource-efficient and safe packaging materials. More and more, fresh fibre paperboard is being used to replace plastic and recycled paperboard, particularly in food and food service packaging.

Demand for fresh fibre paperboards grew globally in 2017, and price levels in local currencies increased. Metsä Board also announced paperboard price increases in 2017.

Continued growth
Metsä Board’s target is profitable growth exceeding the average market growth. In 2017, our paperboard deliveries grew by 15 per cent from the previous year. As expected, Husum’s folding boxboard was the most significant growth factor, but our white kraftliner deliveries were also on a higher level than last year.

Five out of our eight mills, Tako, Husum, Simpele, Kaskinen and Joutseno, set new annual production records. The average price of folding boxboard was burdened by the geographical sales mix of folding boxboard from Husum especially in the first half of the year. However, the situation improved towards the end of the year, and paperboard deliveries to the Americas grew. The strong pulp market and higher-than-expected pulp prices supported our profitability throughout the year.

In April, we started a new extrusion coating line at the Husum mill in Sweden. The line produces PE-coated paperboards suitable for food and food service packaging. We are now well positioned to serve the global food service packaging market through better product availability and competitive quality.

The new bioproduct mill of Metsä Fibre, our associated company, started up in August according to plan, in an excellent market situation. At the end of the year, its production was at a higher level than expected, and its customer deliveries were off to a good start.

Our cash flows from operations grew substantially in 2017, and we have a strong balance sheet. In the autumn, we issued a ten-year bond. The bond was oversubscribed, which reflects the loan market’s strong confidence in Metsä Board’s future.

Responsibility and sustainability at the core of our operations
Sustainability and responsible business operations are integral parts of our operations. Sustainability and responsibility must begin with senior management, to ensure commitment throughout the organisation. In 2017, we again received wide recognition for our sustainability practices, from CDP and EcoVadis, among other parties. Ensuring well-being and safety at work is particularly important for us, and our investment in these aspects has produced visible and tangible results. We have a low employee turnover rate and our accident frequency rate has decreased year on year.

As part of operational development we renewed our key marketing messages and harmonised our product and service portfolio. This strengthens our market position as a company focusing on premium, lightweight paperboards. With our ‘Better with Less’ concept, we aim to promote packaging solutions that create better consumer experiences with less environmental impact. The increasing environmental and product safety requirements and the growing emphasis on the appearance of packaging are driving demand for premium, lightweight, sustainably produced packaging materials. Metsä Board’s paperboards bring all these qualities together. Our products are complemented by three service areas: packaging analysis and design, availability services and technical expertise and R&D. The aim is to jointly with customers develop lighter and more efficient packaging solutions.

A clear direction for the future
Our vision is to be the preferred supplier of premium paperboards creating value for customers globally. This gives us a clear future direction. We want to continue to develop our products and services in line with our customers’ needs, and we want to respond profitably to the growing market demand. Our highly competent employees, clear strategy and strong financial position make me confident in Metsä Board’s future development.

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

Mika Joukio
CEO

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