Metsä Board Financial Statements 1 January 31 December February 2015 at 12:00 noon Page 1/30 METSÄ BOARD CORPORATION FINANCIAL STATEMENTS

Transcription

1 Page 1/30 METSÄ BOARD CORPORATION FINANCIAL STATEMENTS 2014

2 Page 2/30 METSÄ BOARD CORPORATION S OPERATING RESULT EXCLUDING NON-RECURRING ITEMS WAS EUR MILLION IN 2014 FULL YEAR RESULT FOR 2014 Sales were EUR 2,008.4 million (Q1 Q4/2013: 2,019.3). The operating result excluding non-recurring items was EUR million (104.4). The operating result including non-recurring items was EUR million (113.6). The result before taxes excluding non-recurring items was EUR 99.7 million (48.6). The result before taxes including non-recurring items was EUR 77.6 million (57.8). Earnings per share excluding non-recurring items were EUR 0.27 (0.17), and earnings per share including non-recurring items were EUR 0.21 (0.19). The Board of Directors proposes to the Annual General Meeting to be held on 25 March 2015 that a dividend of EUR 0.12 per share will be paid for the 2014 financial year. RESULT FOR THE LAST QUARTER OF 2014 Sales were EUR million (Q3/2014: 513.8). The operating result excluding non-recurring items was EUR 36.9 million (35.2). The operating result including non-recurring items was EUR 6.7 million (34.1). The result before taxes excluding non-recurring items was EUR 31.6 million (27.3). The result before taxes including non-recurring items was EUR 1.6 million (26.1). Earnings per share excluding non-recurring items were EUR 0.10 (0.07), and earnings per share including non-recurring items were EUR 0.02 (0.06). EVENTS DURING THE LAST QUARTER OF 2014 The demand for paperboard continued to be strong, and prices were stable. Metsä Board launched the final steps of transformation and announced that it would grow its paperboard business significantly and is planning to discontinue paper production completely. Metsä Board began the process to divest its lossmaking Gohrsmühle mill in Germany. Metsä Board announced that it would renew its management and reporting structure as of the first quarter of Moody's Investors Service upgraded Metsä Board s credit rating from B2 to B1. The outlook of the rating is positive. Net debt decreased significantly and was EUR 427 million as a result of strong cash flow. EVENTS AFTER THE REPORTING PERIOD Metsä Board updated its long-term financial targets in February The updated targets are return on capital employed (ROCE) minimum 12 per cent from 2017 onwards and net gearing maximum 70 per cent. NEAR-TERM OUTLOOK Metsä Board s operating result excluding nonrecurring items is in the first quarter of 2015 expected to improve slightly compared to the last quarter of The market situation for our main products continued to be strong in the last quarter of Although December is a seasonally weaker month, our operating result was approximately at the same level as in the previous quarter. The general economy continued to be weak in Europe, our domestic market, in Even so, our global paperboard deliveries increased by a total of 10 per cent, and price levels remained unchanged. Delivery volumes increased in line with our strategy, particularly in North America, where linerboard sales are growing steadily, and the launch of our ecological folding boxboard has progressed extremely well. In December 2014, we announced new measures to complete our transformation into a leading paperboard company. We are planning to discontinue paper production completely at Husum and convert the integrated mill into one of the largest fresh forest fibre paperboard units in Europe. In addition, we launched measures to eliminate the losses of the Gohrsmühle mill. Metsä Board is Europe s leading producer of folding boxboard and white fresh forest fibre linerboard and a market pulp supplier. It offers premium solutions for consumer and retail packaging and graphics. The company s sales network serves brand owners, carton printers, corrugated packaging manufacturers and merchants. Metsä Board is part of Metsä Group, and its shares are listed on the NASDAQ OMX Helsinki. In 2014, the company s sales totalled approximately EUR 2.0 billion. The company has approximately 3,100 employees.

3 Page 3/30 Our main goal continues to be the profitable growth of our paperboard business. With the new capacity, we are able to serve our customers even better globally. We will also continue to develop new, even better products in cooperation with our customers and partners. In the coming years, we will raise our profitability to a new level while maintaining a strong balance structure. Mika Joukio, CEO KEY FIGURES Q4 Q3 Q2 Q1 Q4 Q1 Q4 Q1 Q4 Sales, EUR million , ,019.3 EBITDA, EUR million excl. non-recurring items, EUR million EBITDA, % excl. non-recurring items, % Operating result, EUR million excl. non-recurring items, EUR million EBIT, % excl. non-recurring items, % Result before taxes, EUR million excl. non-recurring items, EUR million Result for the period, EUR million excl. non-recurring items, EUR million Result per share excl. non-recurring items, EUR Return on equity, % excl. non-recurring items, % Return on capital employed, % excl. non-recurring items, % Equity ratio at the end of the period, % Gearing ratio at the end of the period, % Net gearing ratio at the end of the period, % Shareholders equity per share at the end of the period, EUR Interest-bearing net liabilities at the end of the period, EUR million Gross investments, EUR million Deliveries, 1,000 tonnes Cartonboard Linerboard and Paper ,035 1,027 Personnel at the end of the period 3,111 3,164 3,370 3,145 3,116 3,111 3,116 EBITDA = Earnings before interest, taxes, depreciation and amortisation Metsä Board sold its holding in Metsä Group Treasury Oy in September Compared to the actual figures for the second quarter of 2013, this improved Metsä Board s equity ratio by approximately 5 percentage points and its return on capital employed by nearly 1 percentage point and reduced its gross debt by more than EUR 300 million.

4 Page 4/30 FINANCIAL STATEMENTS FOR 1 JANUARY 31 DECEMBER 2014 SALES AND RESULT RESULT FOR OCTOBER DECEMBER COM- PARED TO THE PREVIOUS QUARTER Metsä Board s sales amounted to EUR million (Q3/2014: 513.8). Sales decreased by 2.8 per cent. The operating result was EUR 6.7 million (34.1), and the operating result excluding non-recurring items was EUR 36.9 million (35.2). A net total of EUR 30.1 million (-1.1) was recognised as non-recurring items in the operating result for October December, the most significant of these being: An impairment of EUR 26.1 million of fixed assets in the Cartonboard business area related to the lossmaking Gohrsmühle mill. A cost provision of EUR 13.4 million related to the planned discontinuation of paper production at the Husum mill in Sweden in the Linerboard and Paper business area. A sales gain of EUR 7.4 million related to the Niemenranta property transaction in Tampere in Other operations. The operating result excluding non-recurring items was at approximately the same level as in the previous quarter. The delivery volumes of folding boxboard, white fresh forest fibre linerboard and market pulp decreased slightly for seasonal reasons. The delivery volume of uncoated fine paper increased, while the delivery volume of coated papers decreased. The prices of paperboards and market pulp increased slightly from the previous quarter as a result of the strengthening of the US dollar. Sales gains from emission rights improved the result slightly. Cash flow from operating activities amounted to EUR 82.6 million (52.0) in the fourth quarter. The total delivery volume of the Cartonboard business area in October December was 229,000 tonnes (237,000). The total delivery volume of the Linerboard and Paper business area was 255,000 tonnes (265,000). The combined delivery volume of Metsä Board s folding boxboard and fresh forest fibre linerboard in October December was 312,000 tonnes (328,000). Financial income and expenses in the review period totalled EUR -5.0 million (-8.1). Foreign exchange rate differences from trade receivables, trade payables, financial items and the valuation of currency hedges were EUR 3.3 million (0.0). Net interest and other financial income and expenses amounted to EUR -8.3 million (-8.1). Other financial income and expenses include EUR 0.0 million of valuation gains on interest rate hedges (a valuation gain of 0.0). The result before taxes for the review period was EUR 1.6 million (26.1). The result before taxes excluding non-recurring items was EUR 31.6 million (27.3). Income taxes amounted to EUR 4.5 million (-5.3). Internal restructuring within the Group in the fourth quarter reduced income taxes for 2014, causing income taxes to be positive for the review period. Earnings per share were EUR 0.02 (0.06). Earnings per share excluding non-recurring items were EUR 0.10 (0.07). The return on equity was 2.9 per cent (9.8), and the return on equity excluding non-recurring items was 15.4 per cent (10.4). The return on capital employed was 1.8 per cent (9.0), and the return on capital employed excluding non-recurring items was 9.6 per cent (9.2). RESULT FOR 2014 COMPARED TO 2013 Metsä Board s sales amounted to EUR 2,008.4 million (Q1 Q4/2013: 2,019.3). Sales decreased by 0.5 per cent. The operating result was EUR million (113.6), and the operating result excluding nonrecurring items was EUR million (104.4). A net total of EUR million (+9.2) was recognised as non-recurring items in the operating result, the most significant of these being: Sales gains of EUR 32.1 million related to the Niemenranta property transactions in Tampere in Non-core operations. An impairment of EUR 26.1 million of fixed assets in the Cartonboard business area related to the lossmaking Gohrsmühle mill. EUR 17.4 million in damages to UPM-Kymmene related to Metsä Fibre Oy s share transaction in 2012 in Other operations. A cost provision of EUR 13.4 million related to the planned discontinuation of paper production at the Husum mill in Sweden in the Linerboard and Paper business area. A sales gain of EUR 4.0 million related to Metsä Fibre s divestment of Pohjolan Voima shares. Compared to the previous year, the operating result excluding non-recurring items improved as a result of the increased delivery volumes of folding boxboard and white fresh forest fibre linerboard, decreased production costs and the weakening of the Swedish krona against the euro. Lower average prices and delivery volumes of papers had a negative effect on the operating result. The total delivery volume of the Cartonboard business area in 2014 was 911,000 tonnes (872,000). The total delivery volume of the Linerboard and Paper business area was 1,035,000 tonnes (1,027,000). The combined

5 Page 5/30 delivery volume of Metsä Board s folding boxboard and fresh forest fibre linerboard in 2014 was 1,246,000 tonnes (1,135,000), which represents an increase of 10 per cent. Financial income and expenses totalled EUR million (-55.9). In the corresponding period of the previous year, financial expenses increased, mainly as a result of approximately EUR 8 million in additional interest caused by the early repayment of the USDdenominated private note issue. Foreign exchange rate differences from trade receivables, trade payables, financial items and the valuation of currency hedges were EUR +2.7 million (-1.1). Net interest and other financial income and expenses amounted to EUR 41.9 million (54.8). Net interest increased by approximately EUR 5.8 million due to the early repayment of a loan of EUR 350 million and a standby credit facility of EUR 100 million as well as refinancing. Other financial income and expenses included EUR 0 million of valuation gains on interest rate hedges (valuation gain of 4.6). In financial expenses, EUR -2.2 million was recognised as a non-recurring item related to penalty interest on the damages to UPM-Kymmene. The result before taxes for the review period was EUR 77.6 million (57.8). The result before taxes excluding non-recurring items was EUR 99.7 million (48.6). Income taxes had an effect of EUR -9.1 million (+6.3). Income taxes for the review period decreased as a result of internal restructuring within the Group. Earnings per share were EUR 0.21 (0.19). Earnings per share excluding non-recurring items were EUR 0.27 (0.17). The return on equity was 8.1 per cent (7.5), and the return on equity excluding non-recurring items was 10.4 per cent (6.5). The return on capital employed was 7.7 per cent (7.0), and the return on capital employed excluding non-recurring items was 9.1 per cent (6.4). PERSONNEL At the end of the year, the number of personnel was 3,111 (31 December 2013: 3,116), of whom 1,469 (1,465) people worked in Finland. In 2014, Metsä Board employed an average of 3,200 people (3,245). INVESTMENTS Gross investments in 2014 totalled EUR 44.2 million (2013: 66.9). BUSINESS DEVELOPMENT In December 2014, Metsä Board announced that it would launch new measures to complete the final steps of its transformation into a paperboard company. The company also announced that it would invest approximately EUR 170 million in a new folding boxboard machine at the Husum mill in Sweden. The machine has an annual production capacity of around 400,000 tonnes, and it will start up in early It is expected to reach full production capacity by the end of Paper production at the Husum mill is planned to be discontinued for the most part at the end of 2015 and completely by the end of These measures at the Husum mill including the growing sales volumes of fresh forest fibre linerboard are estimated to have a positive effect of EUR 50 million on Metsä Board s annual operating result compared to its actual result for Most of the improvement in the result is estimated to be realised as of 2017, and it is expected to take full effect as of In addition, Metsä Board carries out measures to eliminate the losses of the Gohrsmühle mill in Germany. The primary goal is to divest the mill during the first half of If the mill is not divested within this period, Metsä Board will launch other measures to eliminate the mill s losses, which may also include a partial or full closure of the mill. The Gohrsmühle mill has around 480 employees, and its main products are cast-coated speciality papers and label paper. The mill s sales in 2014 were around EUR 90 million, with an operating loss of approximately EUR 20 million. Metsä Fibre, an associated company of Metsä Board, is planning to build a bioproduct mill to replace the pulp mill in Äänekoski. The cost of the bioproduct mill is around EUR 1.1 billion. Its annual pulp capacity would be 1.3 million tonnes, which is around 800,000 tonnes higher than the current production at the Äänekoski mill. Metsä Fibre intends to make the final investment decision in spring 2015, meaning that the mill would be launched during Metsä Board has decided to invest a maximum of EUR 30 million of capital in the project. Metsä Board s holding in Metsä Fibre will remain at 24.9 per cent even if the plans for the Äänekoski investment are realised. Metsä Board is planning to finance these measures through its current cash and cash equivalents, credit facilities and cash flow from operating activities, and possibly through a rights offering of around EUR 100 million in the first quarter of 2015, based on an authorisation granted by the Annual General Meeting to the Board of Directors. Metsäliitto Cooperative, the principal owner of Metsä Board, is committed to participating in the possible rights issue with around EUR 43 million in accordance with its holding. In March 2014, Metsä Board divested its property in Lielahti in Tampere to the City of Tampere for EUR 26 million. In December 2014, it entered into an agreement on a property transaction of around EUR 7.5 million in Lielahti. A sales gain of around EUR 32 million was recognised for the transactions. Metsä Board discontinued high-yield pulp production in its mill in the Lielahti area and has since had no production operations in the area.

6 Page 6/30 DISPUTES In May 2014, Metsä Board requested that the District Court of Helsinki revoke the judgment issued by the arbitral tribunal on 11 February 2014 that ordered Metsä Board to pay EUR 19.7 million in damages to UPM-Kymmene Corporation. FINANCING Metsä Board s equity ratio at the end of the year was 39.2 per cent (31 December 2013: 40.7), and its gearing ratio was 81 per cent (83). Its net gearing ratio was 51 per cent (70). The change in the fair value of investments available for sale during the review period was approximately EUR -0.6 million. This was mainly due to a decrease in the fair value of Pohjolan Voima shares as a result of a decrease in the market price of electricity mostly offset by a decrease in interest rates. Defined benefit pension obligations increased by approximately EUR 26.3 million, and EUR million after taxes was recognised in other comprehensive income items. The increase in pension obligations resulted from the continued decrease in the discount rate. At the end of the year, net interest-bearing liabilities stood at EUR million (597.2). Foreign currencydenominated loans accounted for 0.5 per cent and floating-rate loans for 23 per cent, with the rest being fixed-rate loans. At the end of the year, the average interest rate on loans was 4.0 per cent (4.8), and the average maturity of long-term loans was 3.5 years (2.7). The interest rate maturity of loans was 27.2 months at the end of the year (18.3). During the period, the interest rate maturity varied between 17 and 34 months. Cash flow from operating activities amounted to EUR million (Q1 Q4/2013: 127.1). Working capital decreased by EUR 59.0 million (increase of 10.8 million). At the end of the review period, an average of 5.6 months of the net foreign currency exposure was hedged. The degree of hedging varied between 5 and 7 months during the period. In March 2014, Metsä Board issued a EUR 225 million unsecured bond. The bond matures on 13 March 2019, and it carries a fixed coupon interest rate of 4.0 per cent per annum. Metsä Board also agreed on a new, unsecured, syndicated credit facility in March. The new facility consists of a EUR 150 million term loan facility and a EUR 100 million revolving credit facility, both maturing in March The proceeds of the financial arrangements were mainly used to prepay the existing EUR 350 million secured term loan maturing in The new revolving credit facility replaced the undrawn EUR 100 million revolving credit facility maturing in The financing agreement includes financial covenants concerning the Group's financial performance and capital structure. Other covenants related to the loan are regular conditions which, among other things, limit the issue of collateral, relinquishment and sale of property, subsidiaries' level of debt, material changes in the business operations and changes in the statutory majority in shareholding. Metsä Board has considerable headroom in relation to the covenants set in the credit agreements. Metsä Board's liquidity has remained strong. At the end of the period under review, the available liquidity was EUR million (2013: 208.6), of which EUR million consisted of revolving credit, EUR 45.6 consisted of undrawn pension premium (TyEL) funds and EUR million of liquid assets and investments. Of the liquid funds, EUR 14.4 million consisted of cash funds and investments and EUR million were interest-bearing receivables comparable to cash funds and available immediately from Metsä Group's internal bank Metsä Group Treasury Oy. As of 30 September 2013, these interest-bearing receivables are recognised in financial assets on the balance sheet. In addition, Metsä Board had other interest-bearing receivables totalling EUR 6.9 million. Metsä Board's liquidity reserve is complemented by Metsä Group s internal undrawn short-term credit facility of EUR million. In November 2014, Moody's Investors Service upgraded Metsä Board s credit rating from B2 to B1. The outlook of the rating is positive. The upgrade had no impact on Metsä Board s current financing costs. SHARES In 2014, the highest price for Metsä Board s A share on the NASDAQ OMX Helsinki Ltd. was EUR 4.75, the lowest price was EUR 2.95 and the average price was EUR At the end of 2014, the price of the A share was EUR At the end of 2013, the price of the A share was EUR 3.08, while the average price in 2013 was EUR In 2014, the highest price for Metsä Board s B share was EUR 4.57, the lowest price was EUR 2.92 and the average price was EUR At the end of the year, the price of the B share was EUR At the end of 2013, the price of the B share was EUR 3.15, while the average price in 2013 was EUR The trading volume of the A share was EUR 4 million, or 3 per cent of the share capital. The trading volume of the B share was EUR 205 million, or 20 per cent of the share capital. The market value of the A and B shares totalled EUR 1,472 million at the end of At the end of the year, Metsäliitto Cooperative owned 40 per cent of the shares, and the voting rights conferred by these shares amounted to 61 per cent. International investors holdings increased to 15 per cent of the shares. The company does not hold any treasury shares.

7 Page 7/30 In October 2014, Metsä Board achieved an excellent ranking in the Nordic Climate Disclosure Leadership Index (CDLI), with a score of 98 out of 100. The high score indicates thorough, high-quality reporting to investors and markets on issues related to climate change. Only companies listed in the Nordic countries with a score in the top 10 per cent are awarded a position in the CDLI, having shown a particularly high level of progress in reporting information pertaining to climate change. DIVIDEND The Board of Directors proposes to the Annual General Meeting to be held on 25 March 2015 that a dividend of EUR 0.12 per share, or a total of EUR 39,4 million, will be paid for the 2014 financial year. The distributable funds of the parent company on 31 December 2014 were EUR 388,415,184.20, of which the result for the financial year is EUR 68,018, The dividend will be paid to shareholders who are registered in the company s shareholder register maintained by Euroclear Finland Oy on the dividend payment record date of 27 March The Board of Directors proposes 8 April 2015 as the dividend payment date. CHANGES IN MANAGEMENT Mika Joukio, 50, M.Sc. (Eng.), started as the CEO of Metsä Board on 1 October Joukio previously worked at Metsä Tissue Corporation, part of Metsä Group. He served as CEO of Metsä Tissue Corporation from the beginning of Before joining Metsä Tissue, Joukio worked as the head of Metsä Board s paperboard business from 2006 to He has held various management positions in Metsä Board and its predecessors, Metsä-Serla Corporation and M-real Corporation, since In December 2014, Metsä Board announced that it would renew its management and reporting structure to ensure the successful implementation of its growth strategy. As of 1 January 2015, the Corporate Management Team consists of Mika Joukio, CEO; Markus Holm, CFO; Seppo Puotinen, SVP, Marketing and Sales; Ari Kiviranta, SVP, Production and Technology; Sari Pajari, SVP, Business Development and Susanna Tainio, SVP, Human Resources. Tainio is a new member in Metsä Board s Corporate Management Team. planned discontinuation by the end of 2017 as well as the cast-coated and label paper business operations at the Gohrsmühle mill. Other operations are reported as before. EVENTS AFTER THE REPORTING PERIOD Metsä Board updated its long-term financial targets in February 2015 to better reflect the company s position as a leading European fresh forest fibre paperboard producer. The updated long-term financial targets are the following: Return on Capital Employed (ROCE) minimum 12 per cent from 2017 onwards Net gearing maximum 70 per cent The old ROCE target was set at minimum 10 per cent and the net gearing target at maximum 100 per cent. Metsä Board s dividend policy remains unchanged. The aim is to pay a dividend of at least 1/3 of the Company's EPS, taking into account the net gearing target. OPERATING ENVIRONMENT AND NEAR- TERM OUTLOOK The delivery volumes of paperboards are estimated to increase slightly in the first quarter of 2015 compared to the previous quarter. No material changes in the prices of paperboard are foreseen at the moment. In market pulp business there are no material market related changes in sight in the first quarter of 2015.Metsä Board s paper deliveries are estimated to increase slightly in the first quarter of 2015, while the average price of paper is estimated to decrease. No material changes in production costs are expected in the first quarter of Foreign exchange rates developed favourably for Metsä Board in the second half of 2014 and at the beginning of The duration of the company s net foreign exchange hedges is approximately six months. For this reason, the positive effect of foreign exchange rates on the result is expected to be more clearly visible as of the first half of Metsä Board s operating result excluding non-recurring items is in the first quarter of 2015 expected to improve slightly compared to the last quarter of CHANGES IN THE REPORTING SEGMENTS As of the first quarter of 2015, Metsä Board s reporting segments are Paperboard and Non-core Operations. The Paperboard segment includes the folding boxboard, fresh forest fibre linerboard, wallpaper base and market pulp business operations. The Non-core Operations segment includes the remaining standard paper business operations at the Husum mill until their NEAR-TERM BUSINESS RISKS The global economy and eurozone economy continue to have considerable uncertainties, which may result in weakened demand, particularly for pulp and paper products, and reduced prices. The sanctions issued by the EU and Russia, and the USA and Russia, because of the crisis in Ukraine, have not had a direct impact on Metsä Board's operations

8 Page 8/30 thus far. However, the sanctions have had indirect effects on the demand for Metsä Board s products. For the time being, the crisis has affected the demand for wallpaper base in Russia and Ukraine. So far, however, the overall financial effect of the crisis on Metsä Board has been minor. Any additional sanctions could have a negative effect on the scope and result of Metsä Board s business operations. Metsä Board is focusing on the development and growth of its paperboard business operations. Business development and growth require strategic choices that involve risks. These uncertainties are related to the product portfolio, targeting of investments and selection of customer segments, for example. The growth of the paperboard business operations depends on the successful growth of sales in North America in particular. Achieving growth in sales outside the company s domestic markets involves cost risks as well as uncertainties related to the introduction of new products. The forward-looking estimates and statements in these financial statements 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 and demand for finished products, raw material costs, the price of energy and the exchange rate development of the euro in relation to the Swedish krona, US dollar and British pound. More information about longer-term risk factors can be found on pages of Metsä Board s 2013 Annual Report. METSÄ BOARD CORPORATION More information: Markus Holm, CFO, tel (0) Juha Laine, Vice President, Investor Relations and Communications, tel (0) More information will be available from 1 p.m. on 5 February A conference call for investors and analysts will be held in English at 3 p.m. (EET). Conference call participants are requested to dial in and register a few minutes earlier on the following numbers: Europe: +44 (0) USA: The conference ID is In 2015, Metsä Board will publish the following financial reports: Interim report for January March 2015 on 7 May Interim report for January June 2015 on 6 August Interim report for January September 2015 on 5 November

9 Page 9/30 BUSINESS AREAS AND MARKET TRENDS CARTONBOARD BUSINESS AREA Q4 Q3 Q2 Q1 Q4 Q3 Q1 Q4 Q1 Q4 Sales, EUR million EBITDA, EUR million excl. non-recurring items, EUR million Operating result, EUR million excl. non-recurring items, EUR million excl. non-recurring items, % Return on capital employed, % excl. non-recurring items, % Deliveries, 1,000 tonnes Production, 1,000 tonnes Personnel at the end of the period 1,515 1,564 1,712 1,546 1,544 1,587 1,515 1,544 The delivery and production volumes are not completely comparable due to the restructuring. RESULT FOR OCTOBER DECEMBER COM- PARED TO THE PREVIOUS QUARTER The operating result before non-recurring items for the Cartonboard business area remained at the same level as in the previous quarter and was EUR 17.3 million (Q3/2014: 17.5). The markedly decreased demand for wallpaper base in the Russian and Ukrainian markets continued to have a negative effect on the result. The delivery volume of folding boxboard decreased slightly for seasonal reasons. The foreign currencydenominated prices of folding boxboard remained stable, but the strengthening of the US dollar improved the euro-denominated sales price. The result included EUR million in non-recurring items mainly as a result of the impairment of fixed assets in Gohrsmühle. The operating result for the previous quarter included EUR -1.1 million in non-recurring items. RESULT FOR 2014 COMPARED TO 2013 The operating result before non-recurring items for the Cartonboard business area improved markedly from the previous year and was EUR 72.3 million (2013: 56.9). The result improved because of higher delivery volumes of folding boxboard and lower production costs. The profitability of the speciality paper business operations decreased slightly in The result included EUR million in non-recurring items. The result for the previous year included EUR +4.8 million in non-recurring items. The deliveries of European folding boxboard producers increased by 1 per cent compared to the corresponding period last year. Metsä Board s folding boxboard deliveries increased by 5 per cent. The deliveries of European folding boxboard producers decreased by approximately 4 per cent compared to the previous quarter. Metsä Board s folding boxboard deliveries decreased by 3 per cent.

10 Page 10/30 LINERBOARD AND PAPER BUSINESS AREA Q4 Q3 Q2 Q1 Q4 Q3 Q1-Q4 Q1-Q4 Sales, EUR million , ,075.0 EBITDA, EUR million excl. non-recurring items Operating result, EUR million excl. non-recurring items excl. non-recurring items, % Return on capital employed, % excl. non-recurring items, % Deliveries, Linerboard and Paper 1,000 tonnes ,035 1,027 Deliveries, Pulp 1,000 tonnes Production, Linerboard and Paper 1,000 tonnes , Production, Metsä Board Pulp 1,000 tonnes ,294 1,249 Personnel at the end of period 1,029 1,037 1,071 1,041 1,047 1,061 1,029 1,047 The delivery and production volumes are not completely comparable due to the restructuring. RESULT FOR OCTOBER DECEMBER COM- PARED TO THE PREVIOUS QUARTER The operating result excluding non-recurring items for the Linerboard and Paper business area improved from the previous quarter and was EUR 31.8 million (Q3/2014: 23.7). The delivery volume of white fresh forest fibre linerboard decreased for seasonal reasons, while its euro-denominated price increased compared to the previous quarter as a result of the strengthening of the US dollar. The delivery volumes of uncoated fine paper increased, with its prices remaining stable. The delivery volume of coated paper declined, with its average sales price decreasing slightly. The delivery volume of market pulp decreased slightly as well, but its average price increased slightly compared to the previous quarter. Sales gain from emission rights improved the result slightly. The result includes a cost provision of EUR million related to the planned discontinuation of paper production at the Husum mill in Sweden. The result for the previous quarter did not include non-recurring items. The total deliveries of European uncoated fine paper producers increased by 4 per cent. Metsä Board s delivery volume of uncoated fine paper increased by 6 per cent. RESULT FOR 2014 COMPARED TO 2013 The operating result before non-recurring items for the Linerboard and Paper business area improved markedly from the previous year and was EUR 90.2 million (2013: 54.3). The result improved because of the increased delivery volume of white fresh forest fibre linerboard, decreased production costs and the weakening of the Swedish krona in relation to the euro. The lower sales price and delivery volume of papers had a negative effect on the result. The result included EUR million in non-recurring items. The result for previous year included EUR -1.2 million in non-recurring items. The total deliveries of European uncoated fine paper producers increased by 2 per cent compared to the previous year. Metsä Board s delivery volume of uncoated fine paper decreased by 11 per cent.

11 Page 11/30 SALES AND RESULT BY SEGMENT EUR million Q4 Q3 Q2 Q1 Q4 Q3 Q1-Q4 Q1-Q4 Cartonboard Linerboard and Paper , ,075.0 Other operations Internal sales Sales , ,019.3 Cartonboard Linerboard and Paper Other operations EBITDA % of sales Cartonboard Linerboard and Paper Other operations Operating result % of sales Non-recurring items in operating result Cartonboard Linerboard and Paper Other operations Group Cartonboard Linerboard and Paper Other operations EBITDA, excl. non-recurring items % of sales Cartonboard Linerboard and Paper Other operations Operating result, excl. non-recurring items % of sales

12 Page 12/ EUR million Q4 Q3 Q2 Q1 Q4 Q3 Q1-Q4 Q1-Q4 Operating result, excl. Non-recurring items, % of sales Cartonboard Linerboard and Paper Group Return on capital employed, % Cartonboard Linerboard and Paper Group Return on capital employed excluding non-recurring items, % Cartonboard Linerboard and Paper Group Capital employed, EUR million Cartonboard Linerboard and Paper Unallocated and eliminations Group 1, , , , , , , ,550.9 The capital employed for a segment includes its assets: goodwill, other intangible assets, tangible assets, biological assets, investments in associates, inventories, accounts receivables, prepayments and accrued income (excluding interest and taxes), less the segment's liabilities (accounts payable, advance payments, accruals and deferred income (excluding interest and taxes). DELIVERIES ,000 tonnes Q4 Q3 Q2 Q1 Q4 Q3 Q1-Q4 Q1-Q4 Cartonboard Linerboard and Paper ,035 1,027 Market Pulp PRODUCTION ,000 tonnes Q4 Q3 Q2 Q1 Q4 Q3 Q1-Q4 Q1-Q4 Cartonboard Linerboard and Paper ,037 1,048 Metsä Fibre pulp 1) Metsä Board pulp ,294 1,249 1) Corresponds to Metsä Board's ownership share of 24.9% in Metsä Fibre.

13 Page 13/30 CALCULATION OF KEY RATIOS Return on equity (%) = (Result before tax - direct taxes) per (Shareholders' equity (average)) Return on capital employed (%) = (Result before tax + interest expenses, net exchange gains/losses and other financial expenses) per (Shareholders' equity + interest-bearing borrowings (average)) Equity ratio (%) = (Shareholders' equity) per (Total assets - advance payments received) Gearing ratio (%) = (Interest-bearing borrowings) per (Shareholders' equity) Net gearing ratio (%) = Earnings per share = (Interest-bearing borrowings - liquid funds - interest-bearing receivables) per (Shareholders' equity) (Profit attributable to shareholders of parent company) per (Adjusted number of shares (average)) Shareholders equity per share = (Equity attributable to shareholders of parent company) per (Adjusted number of shares at the end of period)

14 Page 14/30 FINANCIAL STATEMENTS UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three months ended December 31 December 31 EUR million Note Sales 2, , ,019.3 Change in stocks of finished goods and work in progress Other operating income 2, Material and services , ,513.6 Employee costs Share of results of associated companies and joint ventures Depreciation, amortization and impairment losses Other operating expenses Operating result Share of results of associated companies and joint ventures Net exchange gains and losses Other net financial items 2, Result before income tax Income taxes Result for the period

15 Page 15/30 Three months ended December 31 December 31 EUR million Note Other comprehensive income Items that will not be reclassified to profit or loss Actuarial gains/losses on defined pension plans Income tax relating to items that will not be reclassified Total Items that may be reclassified to profit or loss Cash flow hedges Available for sale financial assets Translation differences Share of other comprehensive income of associated companies and joint ventures Income tax relating to components of other comprehensive income Total Other comprehensive income, net of tax Total comprehensive income for the period Result for the period attributable to Shareholders of parent company Non-controlling interests Total comprehensive income for the period attributable to Shareholders of parent company Non-controlling interests Total Earnings per share for result attributable to shareholders of parent company (EUR/share) The accompanying notes are an integral part of these unaudited interim condensed financial statements.

16 Page 16/30 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET As of December 31 restate EUR million Note ASSETS Non-current assets Goodwill Other intangible assets Tangible assets Investments in associated companies and joint ventures Available for sale investments Other non-current financial assets 6, Deferred tax receivables , ,337.4 Current assets Inventories Accounts receivables and other receivables 1, 6, Cash and cash equivalents 1, 6, Total assets 2, ,097.0 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Equity attributable to shareholders of parent company Non-controlling interests Total equity Non-current liabilities Deferred tax liabilities Post-employment benefit obligations Provisions Borrowings Other liabilities Current liabilities Provisions Current borrowings 6, Accounts payable and other liabilities 6, Total liabilities 1, ,247.4 Total shareholders' equity and liabilities 2, ,097.0 The accompanying notes are an integral part of these unaudited interim condensed financial statements.

17 Page 17/30 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Equity attributable to shareholders of parent company EUR million Note Share capital Translation differences Fair value and other reserves Reserve for invested unrestricted equity Retained earnings Total Noncontrolling interests Total Shareholders' equity, 1 January Comprehensive income for the period Result for the period Other comprehensive income net of tax total Comprehensive income total Share based payments Related party transactions Dividends paid Disposal of subsidiary Aquisition of interest in a subsidiary from noncontrolling interest Shareholders' equity, 31 December Equity attributable to shareholders of parent company EUR million Note Share capital Translation differences Fair value and other reserves Reserve for invested unrestricted equity Retained earnings Total Noncontrolling interests Total Shareholders' equity, 1 January Comprehensive income for the period Result for the period Other comprehensive income net of tax total Comprehensive income total Share based payments Related party transactions Dividends paid Shareholders' equity, 31 December The accompanying notes are an integral part of these unaudited condensed financial statements.

18 Page 18/30 UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT Three months ended December 31 December 31 December EUR million Note restate Result for the period Total adjustments Change in working capital Cash flow from operations Net financial items Income taxes paid Net cash flow from operating activities Acquisition of other shares Investments in intangible and tangible assets Disposals and other items 6, Net cash flow from investing activities Aquisition of interest in a subsidiary from noncontrolling interest -0.1 Changes in non-current loans and in other financial items 6, Dividends paid Net cash flow from financing activities Changes in cash and cash equivalents Cash and cash equivalents at beginning of period 6, Translation difference in cash and cash equivalents Changes in cash and cash equivalents Cash and cash equivalents at end of period 6, The accompanying notes are an integral part of these unaudited condensed financial statements.

19 Page 19/30 NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS NOTE 1 BACKGROUND AND BASIS OF PREPARATION Metsä Board Corporation and its subsidiaries comprise a forest industry group whose main product areas are fresh forest fiber cartonboards, office papers and special papers. Metsä Board Corporation, the parent company, is domiciled in Helsinki and the registered address of the company is Revontulenpuisto 2, Espoo, Finland. Metsä Board s ultimate parent company is Metsäliitto Cooperative. This unaudited interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, and it should be read in conjunction with the 2013 IFRS financial statements. The same accounting policies have been applied as in the 2013 IFRS financial statements with the following exception: Depreciation of machinery and equipment during the financial year has been specified further between the quarters where applicable in order to correspond with the allocation of the use of the economic benefit of the asset. Metsä Board has reclassified interest-bearing receivables comparable to cash funds and available immediately from Metsä Group's internal bank Metsä Group Treasury Oy from 30 September 2013 on as Cash and cash equivalents. Metsä Board disposed its 51 per cent shareholding in Metsä Group Treasury Oy to Metsäliitto Cooperative on 30 September The Group has adopted the following new standards, amendments to existing standards and interpretations on 1 January 2014: IFRS 10 Consolidated Financial Statements and subsequent amendments: IFRS 10 builds on existing principles by identifying the concept of control as the determining factor when deciding whether an entity should be incorporated within the consolidated financial statements. The standard also provides additional guidance to assist in the determination of control where this is difficult to assess. The new standard did not have any impact on consolidated financial statements. IFRS 11 Joint Arrangements and subsequent amendments: In the accounting of joint arrangements IFRS 11 focuses on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. In future jointly controlled entities are to be accounted for using only one method, equity method, and the other alternative, proportional consolidation is no longer allowed. The new standard did not have any impact on consolidated financial statements. IFRS 12 Disclosures of Interests in Other Entities and subsequent amendments: IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including associates, joint arrangements, structured entities and other off-balance sheet vehicles. The new standard will expand the notes the Group provides for its interests in other entities. IAS 28 Investments in Associates and Joint Ventures (revised 2011): Following the issue of IFRS 11 the revised IAS 28 includes the requirements for joint ventures, as well as associates, to be equity accounted. Amendments to IAS 32 Financial Instruments: Presentation: The amendments provide clarifications on the application of presentation requirements for offsetting financial assets and financial liabilities on the statement of financial position and give more related application guidance. Amendments to IAS 36 Impairment of Assets: The objective of the amendments is to clarify that the scope of the disclosures of information about the recoverable amount of assets, where that amount is based on fair value less costs of disposal, is limited to impaired assets. Amendments to IAS 39 Financial Instruments: Recognition and Measurement: The amendments made to IAS 39 provide an exception to the requirement to discontinue hedge accounting in certain circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. All amounts are presented in millions of euros, unless otherwise stated. This interim report was authorized for issue by the Board of Directors of Metsä Board on 5 February NOTE 2 SEGMENT INFORMATION The Corporate Management Team is the chief operational decision-maker, which monitors the business operations based on the operating segments. Metsä Board Corporation renewed its management and reporting structure as of 1 January 2014 to better reflect the company s strategy and to create a better platform for growth in the folding boxboard and kraftliner businesses. The company operates through two business areas which are also be the company s reporting segments from 1Q 2014 reporting onwards: Cartonboard and Linerboard and Paper. Cartonboard business area includes Kyro, Simpele, Tako and Äänekoski folding boxboard mills, Kyro wallpaper machine and Joutseno BCTMP mill located in Finland as well as Gohrsmühle mill in Germany. Linerboard and Paper business area includes Husum mill in Sweden as well as Kemi kraftliner and Kaskinen BCTMP mills in Finland. Accounting for the 24.9 per cent ownership in Metsä Fibre Oy remains unchanged. The associated company

20 Page 20/30 result of Metsä Fibre will continue to be allocated to business segments based on their respective pulp consumption. About 60 per cent of the result impact of Metsä Fibre ownership is expected to be booked in Linerboard and Paper business area and the rest in the Cartonboard business area. The sales of the reportable operating segments are mainly generated by sales of board and paper, but Linerboard and Paper operating segment includes sales of pulp to external customers. The accounting principles for the segment information are equal to those of the Group and all inter-segment sales are based on market prices. Segment sales Yaer ended December 31 December EUR million External Internal Total External Internal Total Cartonboard Linerboard and Paper 1, , , ,075.0 Other operations Elimination of intersegment sales Total sales 2, , , ,019.3 Operating result by operating segments December 31 December 31 EUR million Cartonboard Linerboard and Paper Other operations Operating result total Share of profit from associated companies Finance costs, net Income taxes Result for the period Non-recurring items totaled EUR million, EUR million in operating result and EUR -2.2 million in financial items. Metsä Board s share of profit on sale of Pohjolan Voima shares disposed by Metsä Fibre was EUR 4.0 million of which EUR 1.5 million includes in Cartonboard business area and EUR 2.5 million in Linerboard and Paper business area. In addition Cartonboard business area includes other non-recurring items EUR million. The most significant non-recurring item was an impairment of EUR 26.1 million of fixed assets related to the loss-making Gohrsmühle mill. Linerboard and Paper includes a provision of EUR 13.4 million related to reorganization recognized in Metsä Board Sverige AB. Other operations includes non-recurring items total EUR million, EUR million in operating result and EUR -2.2 million in financial items. Metsä Board recognized EUR 32.1 million profit on sale related to divestment of property in Lielahti, Tampere in Finland. The Court of Arbitration had its judgment on 11 February 2014 related to the arbitration proceedings raised by UPM-Kymmene on 2 November Other operations include EUR 17.4 million expenses in operating result and EUR -2.2 million in financial items related to the judgment.