Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

Ready for sustainable growth

Business operations and value creation 2 This is Metsä Board 4 CEO’s review 6

Strategy and financial targets

The year 2023 was challenging for Metsä Board. Our business was affected by the weaker pulp and paperboard market and high cost level. Over the year, we systematically implemented our strategic programmes and helped our customers reduce their use of plastics and the carbon footprint of packaging. The Kemi and Husum investment projects, completed in the second half of the year, and our strong financial position offer us excellent conditions for future sustainable growth. I am proud of every Metsä Board employee’s work and commitment to our company’s future.

Value creation

Financial development 10 Key figures 12

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

Consolidated financial statements

In our operations and development efforts, we

Competitiveness from energy and fibre self-sufficiency

78 Notes to the consolidated financial statements 126 Parent company financial statements 129 Notes to the parent company financial statements 142 The Board’s proposal to the Annual General Meeting for the distribution of funds 143 Auditor’s Report 147 Shares and shareholders 151 Ten years in figures 152 Taxes 153 Production capacities 155 Calculation of key ratios and comparable performance measures Corporate governance 157 Corporate governance statement 165 • Board of Directors of Metsä Board 168 • Corporate Management Team of Metsä Board

The world around us has changed rapidly, and the changes have also had a strong impact on the paperboard market. The pandemic led to exceptionally steep growth in the demand for packaging materials, with restrictions on mobility shifting consumption from services to products. Since then, rising inflation and interest rates have affected consumers’ purchasing power and behaviour: prices of consumer products have increased, and people now consider their purchases more carefully. Weaker consumer demand has led to major inventory adjustments in the value chain. In addition, the overall market balance for paperboards, especially in Europe, has been affected by the discontinuation of sales to Russia and increased paperboard supply from Asia to the Middle East and South America. Notable year-over-year change in profitability Our sales were EUR 1.9 billion, and our comparable operating result was EUR 122 million. Our comparable return on capital employed was 5.1%, compared to a record high of over 20% the previous year. Paperboard and market pulp delivery volumes were well below capacity levels, and we adjusted our production to match the low demand level. Our performance was also impacted by high cost level and a significantly lower result from our associated company Metsä Fibre compared to the previous year. However, the average sales price of our paperboards improved from 2022. To safeguard profitability, we focused our paperboard sales on customers in our main market areas, who most benefit from sus- tainably produced premium fresh fibre paperboards. In the second half of the year, we temporarily laid off some of our personnel at our mills in Finland. Through efficient management of working capital, we managed to support our cash flow from operating activities, which amounted to EUR 343 million. Our balance sheet remained strong in the challenging market situation.

have systematically done the right things, which will have

The energy crisis in Europe highlighted the importance of energy self-sufficiency. Metsä Board’s energy self-sufficiency is already 90%, increased by the new recovery boiler in Husum and the additional production from the Olkiluoto 3 nuclear power plant. In addition to own production, our self-sufficiency in pulp is supported by 24.9% holding in Metsä Fibre. Wood, our main raw material, accounts for more than a quarter of our total costs. The discontinuation of wood supply from Russia led to a tighter wood market in the Baltic Sea region, and pulpwood prices increased in Finland and Sweden in 2023. Our wood supply is handled by Metsä Group, which is Finland’s largest buyer of wood. Wood is only procured from sustainably managed forests, where growth exceeds use. In the spring of 2023, Metsä Group adopted regenerative forestry principles which improve forests’ carbon storage, biodiversity and ability to adapt to climate change. In accordance with the principles, the state of forest nature is not only improved, but the improvement is also demonstrated with measurements. A year of significant investments Over the year, several significant investments were completed. At the Kemi kraftliner mill, we completed a development programme to increase the production capacity of the white kraftliner and improve the mill’s energy and water efficiency. Similarly, the modernisation of the folding boxboard production line in Husum will increase our annual folding boxboard capacity and improve the mill’s production efficiency. Moreover, Metsä Fibre’s new bio- product mill started up in Kemi. It is the largest investment in the history of the Finnish forest industry. The mill produces softwood and hardwood pulp more cost-effectively and offers world-class production, environmental and energy efficiency.

a positive impact on our business in the future.

Concrete actions to ensure sustainability In the circular economy of fibre-based packaging materials, our task is to provide the market with fresh fibre paperboards as resource efficiently as possible, contribute to the replacement of fossil-based materials and reduce the carbon footprint of packag- ing. Lighter-weight paperboards and resource efficiency are the key areas in our product development, and they also form the basis for future investments. We aim to reduce wood, energy and water use per tonne of paperboard produced compared to our current pro- duction units. In 2023, we implemented measures and investments at our mills in line with our strategic programmes, which aim to make our production entirely fossil free by the end of 2030. These measures will continue as planned in the coming years. Ready for future growth Our goal is to continue to grow in fibre-based packaging materials and to renew our industrial operations. Population growth, urbanisation and plastic replacement remain strong trends that will increase demand for fibre-based packaging in the long term.

Consumer preferences favour fossil free packaging materials, and several brand owners are committed to ambitious targets to reduce plastic use in their packaging. Our competitiveness is boosted by high quality of our paperboards, reliable deliveries, and a service concept, which helps our customers improve their material efficiency and reduce the environmental impact of their packaging. Although our business environment still involves uncertainties, I am confident about Metsä Board’s future. In our operations and development efforts, we have systematically done the right things, which will have a positive impact on our business in the future. Our strong financial position will support us in this growth. The Board of Directors proposes a dividend of EUR 0.25 per share for 2023. I would like to thank Metsä Board’s employees for their great work and all our customers, shareholders and other partners for their trust and good cooperation.

170 Remuneration report 174 Investor relations and investor information

Mika Joukio CEO

CEO’s review | METSÄ BOARD ANNUAL REVIEW 2023