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Management Side
Metsä Board Grows its Paperboard Business
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Espoo, Finland 10 December 2014 -- Metsä Board Corporation, part of Metsä Group, is introducing the final steps of transformation to a paperboard company and invests approximately EUR 170 million in a new folding boxboard machine at its Husum mill in Sweden. The production capacity of the new machine is approximately 400,000 tonnes per annum and it will start up in early 2016. Full production capacity is expected to be reached by the end of 2016. Husum mill's paper production is planned to be discontinued mostly at the end of 2015 and fully by the end of 2017. These measures in Husum, including also the increasing fresh forest fibre linerboard sales volumes, are expected to improve Metsä Board's operating result by approximately EUR 50 million per annum mostly in 2017 and fully from 2018 onwards compared to 1-3Q 2014 annualized performance.

Metsä Board is also planning new measures to eliminate losses of its Gohrsmühle mill in Germany. The primary target is to divest the mill during the first half of 2015. If the divestment does not materialize in the set time frame, Metsä Board will introduce other measures to eliminate the unit's heavy losses. Gohrsmühle mill has approximately 480 employees and its main products are cast coated and label papers. The mill's annual sales amount to approximately EUR 85 million and annualized operating loss to EUR 20 million based on the 1-3Q 2014 performance.

Metsä Board's associated company Metsä Fibre is planning to build a bioproduct mill with an investment cost of approximately EUR 1.1 billion to replace the current pulp mill in Äänekoski, Finland. The planned pulp capacity of the mill is 1.3 million tonnes leading to a net capacity increase of approximately 800,000 tonnes compared to the existing pulp production at the site. Metsä Fibre targets to make the final investment decision in spring 2015 and operations at the mill would commence during 2017. According to preliminary plans, the amount of capital invested by Metsä Board in the project would be maximum EUR 30 million. Metsä Board's ownership share in Metsä Fibre remains at 24.9 per cent also after the planned Äänekoski investment.

These planned measures are expected to be financed by current liquidity, operating cash flow and potentially also by an approximately EUR 100 million rights issue, based on the Board of Directors' authority granted by the AGM. The potential rights issue is targeted to be implemented in 1Q 2015. The company's principal shareholder Metsäliitto Cooperative is committed to a pro rata investment of approximately EUR 43 million in the potential rights issue.

Metsä Board will renew its management and reporting structure to support successful implementation of the new growth and restructuring actions and to strengthen its position as the leading paperboard company. A separate stock exchange release related to this topic has been published today at the same time as this release.

"These final steps of our transformation to a paperboard company allow us to grow significantly our core business and exit the weak paper production. Our profitability will be raised to a new improved level without compromising the solid balance sheet," comments CEO Mika Joukio.

Growth of paperboard business and planned exit from paper production

Metsä Board's strategy is to grow profitably its fresh forest fibre paperboard business and reduce its exposure in the declining paper businesses. Measures announced today strengthen the company's market leadership in fresh forest fibre paperboards and enable an exit from the weak paper operations. Thanks to these new measures Metsä Board's total paperboard capacity will increase from 1.4 million to over 2 million annual tonnes by 2018.

"We have experienced good growth in our folding boxboard and linerboard businesses in recent years. Demand for our sustainable, safe and cost-competitive folding boxboards has recently increased especially in North America. In order to continue profitable growth, we must increase folding boxboard production capacity. After extensive planning work, we have decided to invest in the new folding boxboard machine at Husum, which is our biggest mill integrate including a large two line pulp mill, state of art coating technology, an efficient power plant, and own harbor. This is a very cost-competitive alternative to increase our capacity," continues Joukio.

After the investment at Husum, Metsä Board's total folding boxboard capacity will be approximately 1.3 million annual tonnes. The new folding boxboard capacity in Husum, approximately 400,000 tonnes per annum, is planned to be sold mainly to markets outside Europe, especially to North America, and also to the food service segment globally. Metsä Board entered the food service segment in early 2014. If the demand supply situation so requires in the coming years, Metsä Board has possibilities to adjust its production accordingly.

Metsä Board started to produce uncoated fully bleached fresh forest fibre linerboards at Husum mill in 2013 and expanded to coated grades in 2014. At the moment, the linerboard sales volume run rate is over 100,000 tonnes per annum. Husum's linerboard annual production is planned to be increased to close to 300,000 tonnes by 2018. These volumes are expected to be sold both in Europe and North America increasingly also to new applications e.g. in food packaging.

Metsä Board plans to discontinue standard paper production at Husum mostly by the end of 2015. Total paper capacity planned to be ceased is approximately 600,000 tonnes annually. Personnel impacts will be clarified in the statutory negotiations that will be commenced immediately.

After the investment and the planned paper capacity closures, there will be two paperboard machines at Husum mill:

- Board Machine 1 with annual folding boxboard production capacity of about 400,000 tonnes.

- Board Machine 2 (current Paper Machine 8) with annual linerboard capacity of about 300,000 tonnes. Uncoated fine paper business reel production will be continued in the Board Machine 2 until the linerboard sales volumes have been grown to the full capacity of the machine.

The annual pulp production capacity at Husum is approximately 750,000 tonnes per annum including both softwood and hardwood grades. In addition to chemical pulp produced at the site, the new folding boxboard production at Husum will use majority of the BCTMP produced at Kaskinen mill in Finland from 2016 onwards.

Financial implications

Based on growth of the folding boxboard and linerboard businesses as well as the planned discontinuation of Husum's paper production, Metsä Board's annual sales is expected to remain rather stable. The positive impact of the new measures in Husum on Metsä Board's annual operating result excluding non-recurring items is expected to be approximately EUR 50 million compared to 1-3Q 2014 annualized performance. Profitability improvement impact is expected to materialize mostly in 2017 and fully from 2018 onwards. Investment shutdown and accelerated depreciations of the paper capacity planned to be discontinued in Husum is forecast to impact operating result in 2015 negatively by roughly EUR 20 million.

Linerboard and Paper business area's 4Q 2014 operating result will include approximately EUR 14 million in non-recurring costs related to planned discontinuation of paper production at Husum mill. Cartonboard business area's 4Q 2014 operating result will include approximately EUR 27 million fixed asset impairments due to the weak performance of Gohrsmühle mill. A separate stock exchange release related to all non-recurring items in 4Q 2014 has been published today at the same time as this release.



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