Metsä Board's regional goals

 

 

 

 

 



Metsä Board’s main market area is EMEA. We have established our strong market position in Europe with long-lasting customer relationships – especially with brand owners. In Europe, safety is increasing its significance in food packaging. Paperboard is seen as a strong alternative to plastics and aluminium. Growing e-commerce is increasing the demand for high-end white-top kraftliners.

In the coming years, Metsä Board is seeking the most rapid growth in the Americas. We have a strong market position in both folding boxboard and coated white kraftliner. We see several growth drivers in the Americas: limited local availability of premium, lightweight folding boxboard; non-integrated converters looking for alternative suppliers in paperboard; and strong demand in food service applications made from fresh fibre paperboards. In addition, the rise of discounters and growing e-commerce are increasing demand for high-end white-top fresh fibre linerboards.

In the Asia-Pacific region, Metsä Board focuses on premium segments and aims for moderate growth, primarily in cooperation with brand owners.

Market overview

Fresh fibre paperboard – supporting sustainable consumption

Demand for recyclable packaging and fresh fibre paperboards is supported by several megatrends, such as population growth, globalisation, urbanisation and climate change. Scaring pictures of oceans being filled with plastics as well as the increasing understanding of the scarcity of resources increase focus especially on environmental issues. Paperboards can reduce or replace the use of plastics in many packaging end uses and the application areas will widen as the properties of paperboards are further developed.

Paperboard is made from renewable, biobased wood fibre and is highly recycled. For example, in Europe, 85 per cent of paperboard is collected for recycling, while the corresponding figure for plastic is 42 per cent (Eurostat). Wood fibre is recycled an average of 3.6 times in a year (CEPI). To keep the fibre loop alive, a constant inflow of fresh fibres is needed: wood fibre cannot be recycled an unlimited number of times because the fibres become shorter and weaker with each cycle. Fresh fibre paperboards provide good properties for packaging in which high quality printing and special effects are required. Because fresh fibres contain no unknown chemical substances, they are the safest fibre choice for food packaging. They do not alter the taste, smell, colour or composition of the food that is packaged or served in them. Recycled fibres are best suited to end uses in which premium quality or high hygiene is not the key criteria.

Metsä Board's position in paperboard market

Metsä Board is a pure-play paperboard company, focused on ecological and high-quality paperboards. Company's product portfolio consists of folding boxboard and white kraftliners. Folding boxboard is mainly used in consumer goods packaging, such as food, beauty care, pharma and electronics. White kraftliners are used to for various retail purposes, such as retail-ready solutions and point-of-sale-displays. White kraftliners also benefit from the increasing e-commerce. Metsä Board is the leading producer of folding boxboard and white kraftliners in Europe and largest producer of coated white kraftliners globally.

In general, the profitability of the industry is driven by macroeconomic factors, industrial production, the competitive situation and naturally by the profitability of customers and end users. Demand has been relatively insulated from economic downturns, as many of the end use products, such as food, are stable by nature.

The European market for folding boxboard and white kraftliner is quite concentrated. The five largest producers represent 80–90 per cent of the European capacity in these grades.

 

Market shares 

Largest Folding Boxboard Producers in Europe*

by Production Capacity and Capacity Share (1,000 tonnes per annum)

Company Capacity % Capacity: tons/year (thousand)
Metsä Board 35 1330
Competitor 1 21 810
Competitor 2 10 400
Competitor 3 10 325
Competitor 4 9 250
Others 19 685
*Total capacity : 3.9 M tonnes
Source: Metsä Board estimates

 

Largest White Fresh Fibre Linerboard Producers in Europe*

(1,000 tonnes per annum)

Company Capacity % Capacity: tons/year (thousand)
Metsä Board 30 690
Competitor 1 23 495
Competitor 2 14 310
Competitor 3 11 235
Competitor 4 8 165
Others 10 225
*Total capacity : 2.2 M tonnes
Source: Metsä Board estimates

Near-term risks and uncertainties 

 

From January–June 2020 Half-year Financial Report (published on 30 July 2020):

 

A prolongation of the coronavirus pandemic may cause disruptions in Metsä Board's production and supply chains. The slowdown of the global economy resulting from the pandemic may reduce demand for Metsä Board's products and have a negative impact on the company's profitability in the near future. In addition, customers' weaker cash position or slower payment behaviour may have an impact on Metsä Board's cash flow and lead to credit losses.

There are also other considerable uncertainties in the global economy. If realised, they may result in weakened demand and reduced prices for paperboard and pulp products. An imbalance in supply and demand may impact the prices of end products and Metsä Board's profitability.

Various countries have imposed import duties and other trade restrictions on each other's products, but these have not had a direct impact on Metsä Board's business operations so far. Negative developments in world trade could, if continued, weaken Metsä Board's result.

There are several geopolitical risk concentrations around the world, and forecasting developments in them is difficult. Changes in these areas may be very sudden and unpredictable. There have been, and will continue to be, international sanctions related to these crises, and they may also have a direct or indirect impact on the demand for paperboards and, therefore, on Metsä Board's result.

Metsä Board is focusing on the active development and growth of its paperboard business. The growth of the paperboard business and the introduction of new products to the markets depend on the success of sales. Increasing sales on a global scale also involves cost and exchange rate risks. In addition, the acceptability and taxation of various packaging materials involve regulatory risks.

A majority of Metsä Board's production is located in Finland. Finland has a history of labour disputes in both the forest industry and the distribution chain of forest industry products. These may have a negative impact on production volumes and customer deliveries, and weaken the company's competitiveness and profitability.

Wood accounts for more than a quarter of Metsä Board's total costs. The availability of the wood raw material becoming more difficult or a sudden increase in prices would have a weakening effect on Metsä Board's result.

Metsä Board's climate risks concern particularly forests, as well as the use of energy and water. Regulation may steer the future use of forests. Increased regulation aiming to mitigate climate change and reduce greenhouse gas emissions may, furthermore, increase costs and result in substantial change requirements applicable to production technology. The supply and demand of products in a low-carbon economy may differ from the current situation. Climate change may cause an increasing number of extreme weather phenomena, such as storms, floods and drought, and weaken the availability of the process water and electricity required by mills and result in breaks in production. Extreme weather conditions may also limit the availability of the wood raw material. Should they materialise, climate risks could have a negative impact on Metsä Board's profitability. 

Changes in the market price of pulp have a significant impact on Metsä Board's profitability. Metsä Board's annual overall pulp position shows a surplus of roughly 600,000 tonnes. A 10% decline (increase) in the price of market pulp would have an approximately EUR 30 million negative (positive) impact on the company's annual operating result.

The US dollar strengthening by 10% against the euro would have a positive impact of approximately EUR 61 million on Metsä Board's annual operating result. Correspondingly, the Swedish krona strengthening by 10% would have a negative impact of approximately EUR 37 million. The British pound strengthening by 10% would have a positive impact of approximately EUR 8 million. The impact of weakened exchange rates would be the opposite. The sensitivities do not include the impact of hedging.

The forward-looking estimates and statements in this Half-year financial report are based on current plans and estimates. For this reason, they contain risks and other uncertainties that may cause the results to differ from the statements concerning them. In the short term, Metsä Board's result will be particularly affected by the price of and demand for finished products, raw material costs, the price of energy, and the exchange rate development of the euro compared to the company's other main currencies.

Further information on long-term risks and risk management is available on pages 44–47 of Metsä Board's 2019 Annual Report.

risks

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