Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

■ 3.4 Retirement benefit obligations

Post-employment benefits

Key characteristics of Performance based share incentive scheme 2023–2027 are summarised in the table below:

Performance based share incentive scheme 2023–2027

EUR million

2023

2022

Liabilities recognised in balance sheet Defined benefit pension plans Defined contribution pension plans

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

10.0

10.3

31 Dec 2023

2023–2025

2024–2026

2025–2027

Total

0.1

Accounting principles The Group’s arrangements concerning benefits following the termination of employment are either defined benefit pension plans or defined contribution pension plans. A defined contribu- tion plan is a pension arrangement in which fixed contributions are made to a separate unit, and the Group does not have legal or constructive obligations to make additional contributions if the fund has insufficient funds to pay all benefits to all employees in accordance with its obligations in the future. All arrangements that do not meet these requirements are considered to be defined benefit plans. A defined benefit plan defines the pension benefit that the employee will receive upon retiring , the amount of which depends on factors including the employee’s age, years of service and salary level, for example. With defined benefit plans, the current value of the obligations on the end date of the reporting period, less the fair value of the assets included in the arrangement, is recognised on the balance sheet as a liability. The amount of the obligation arising from the plan is based on annual calculations by independent actuaries using the projected unit credit method. The current value of the obligation is determined using the interest rate equalling the interest rate of high-quality bonds issued by the companies as the discount rate for the estimated future cash flows. The bonds used in determining the interest rate have been issued in the same currency as the benefits to be paid, and their maturity is approxi- mately the same as that of the corresponding pension obligation. Actuarial gains and losses from experience verifications and changes in actuarial assumptions are recognised through items of other comprehensive income as a reimbursement or charge in equity for the period during which they have been incurred. Past service costs are recognised immediately through profit and loss. Apart from contributions related to pension insurance, the Group does not have any other payment obligations in defined contribu- tion plans. Obligation-based payments are allocated as expenses in accordance with accrual accounting. Key estimates and judgements The determination of the current value of pension obligations arising from defined benefit plans and the items to be recognised as expenses during the financial period is based on the use of actuarial assumptions. The assumptions include, among other things, the discount rate, the assumed increase in the salary level and the assumed life expectancy. The actuarial assumptions used may differ significantly from the actual results, due to changes in economic conditions or the employment relationships of the people covered by the arrangements. Significant differences between the assumptions and actual results may affect the amount of the pension obligation and the value of items to be recognised as expenses.

Key characteristics Shares allocated to the scheme, shares

Total

10.1

10.4

432,163

Grant date(s)

30.1.2023, 6.9.2023

Surplus of funded plans in assets

-3.4

Criteria

Equity ratio, ROCE ja EBIT

Strategy and financial targets

Value creation

Personnel (31 December 2023)

Factors used to determine fair value (EUR) 1)

Defined benefit pension plans The most significant defined benefit pension plans are in Germany and United Kingdom. Group’s German defined benefit pension plans grant old-age pensions, disability pensions and family pensions exceeding the statutory pension level to eligible officials and senior management. The retirement age is usu- ally 67 years, and the amount of pension depends on the length of service. Officials and senior management are required to have a service history of 25–30 years to receive a full pension. Some of the pension arrangements are closed. The defined benefit plans in Germany are unfunded. The defined benefits plans in United Kingdom guarantee participants of the plan a pension, the amount of which is based on the length of service and the salary in the most recent working years. The arrangement is closed to new members. The UK pension scheme operates under an independent foundation separate from the Group. The Group also has defined benefit plans in Finland, Belgium and Italy.

Financial development 10 Key figures 12

Share price at grant date Share fair value at grant date

8.34 6.90 0.48 7.19

Annual dividend assumption in fair value measurement Share price at payment date / balance sheet date Fair value on balance sheet date Effect on result and financial position (EUR)

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

Expense in 2023, share-based payments settled as equity Share-based payments settled in cash, unpaid part, estimate

2,906

Consolidated financial statements

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

Number of shares 1 January 2023 2) Outstanding at the beginning of the period

432,163

Changes during the year Shares granted

7,800

Number of shares 31 December 2023 Outstanding at the end of the period

424,363

1) The fair value of the share settled component at the grant date was the share price of Metsä Board Corporation’s B share less any dividends estimated by analyst consensus to be paid before the payment of the incentive. The fair value of the share based payment is recognised to the number of shares based on the best available estimate of the total incentive to which the participants are expected to be entitled. 2) The amounts in the table represent brutto amounts, i.e. the number of shares to be given based on the share based payment schemes. In addition, the payment will include a cash settled compo- nent used to cover taxes and tax-like charges.

Amounts in balance sheet

EUR million

2023 35.5 -37.3

2022 36.3 -37.3

Present value of funded obligations

Fair value of plan assets Deficit (+) / surplus (-)

-1.8 8.3

-0.9

Present value of unfunded obligations

7.8

Deficit (+) / surplus (-) of defined benefit pension plans, total

6.5

6.9

Defined benefit-based pension liabilities on the balance sheet, net Defined benefit-based pension assets on the balance sheet, net

10.0

10.3

-3.4

170 Remuneration report 174 Investor relations and investor information

Consolidated financial statements | METSÄ BOARD ANNUAL REVIEW 2023