METSÄ BOARD Annual review 2024
4.3 Other investments
4.4 Inventories
4.5 Trade receivables and other receivables
Business operations and value creation 2 This is Metsä Board 4 CEO’s review 6
EUR million
2024 218.3
2023 253.0
Accounting principles Inventories are measured at the lower of acquisition cost or net realisable value. In measuring inventories, the FIFO principle is observed or, alternatively, the weighted average price method, depending on the nature of the inventories. The acquisition cost of finished products acquired comprises all purchase costs, including direct transport, handling and other expenses. The acquisition cost of finished and semi-finished products of own manufacture includes raw materials, direct production costs, and the systematically allocated portion of variable manufacturing overheads and fixed overheads at the normal level of operation. Borrowing cost is not included in the acquisition cost. Net realisable value is the estimated sales price in ordinary business operations less the estimated cost of completion and the necessary sales costs. Key estimates and judgements The Group regularly reviews its inventories for situations where the inventories contain non-marketable items or items with net realisable value below the acquisition cost. When necessary, the Group reduces the book value of the inventories accordingly. This review requires the management’s estimates of the sales prices of products, the cost of completion and the costs necessary to make the sale. Any changes in these estimates might lead to an adjustment in the book value of the inventories in future periods.
Accounting principles Trade receivables are initially measured at fair value and later at amortised cost, taking into account impairment. Expected credit losses on trade receivables are calculated using a provision matrix. The expected credit loss expense is recognised by applying expected credit loss percentages based on five-year historic losses – net of credit insurance – on trade receivables from external debtors outstanding at the end of the period. The expected credit loss percent-ages used in the matrix are 0.1 (2023: 0.2). A credit loss is recognised when a customer enters legal bankruptcy or becomes past due for more than 180 days without a valid payment plan or other valid reasons.
Accounting principles Other investments consist of unlisted equity investments. The most significant of these is the Group’s holding in Pohjolan Voima. This investment is unlisted and strategic in nature, serving the Group’s long-term energy sourcing needs. This being the case, the Group classifies its shares in Pohjolan Voima as financial assets at fair value recognised under other items of comprehen- sive income. Changes in their fair value are presented in the fair value reserve, accounting for the tax effect. When the investment is abandoned, the fair value changes accumulated in the equity are transferred to the retained earnings from the fair value fund. The Group classifies its other equity financial assets as financial assets at fair value to be recognised as financial assets through profit and loss. The fair values of shares other than listed shares are determined using various valuation models, such as the price levels of recent transactions and valuation methods based on the present value of discounted cash flows. As far as possible, the valuation methods are founded on market-based valuation factors. Unlisted shares are classified in level 3 of the fair value hierarchy. The levels of the fair value hierarchy are presented in note 5.7.
Pohjolan Voima Oyj
Other unlisted shareholdings
1.4
1.4
Other investments total
219.7
254.4
Strategy and financial targets
The most important unlisted shareholding under other investments consists of a 2.6% stake in Finnish energy company Pohjolan Voima Oyj, which produces electricity and heat for its shareholders in Finland. Pohjolan Voima trades with its shareholders at prices based on production costs, which generally are lower than market prices. The Group is entitled, through the B shares of Pohjolan Voima, to a share of approximately 5.2% of the energy generated by the Olkiluoto 1 and Olkiluoto 2 nuclear power plants and, through the B2 shares of Pohjolan Voima, to a share of 1.5% of the energy generated by the Olkiluoto 3 nuclear power plant, now being deployed. The ownership is measured quarterly at fair value on share series basis by using the average of discounted cash flow method and valuation based on earlier transactions. The weighted average cost of capital used was 5.51 (5.35) %. The acquisition cost of shares in Pohjolan Voima Oyj is EUR 28.3 million (28.3) and the fair value EUR 218.3 million (253.0). The change in fair value was due to an updated long-term price forecast for the electricity used in the shares’ valuation model. Shareholder agreement restricts sale of shares of Pohjolan Voima to buyers that are not existing shareholders.
8
Value creation
Financial development 10 Key figures 12
Report of the Board of Directors
20 20 37 70 89 96
• Sustainability statement
General information
E – Environment
S – Social responsibility
Trade receivables and other non-interest bearing receivables
G – Governance
EUR million
2024
2023
Annexes to the Sustainability statement
From Group companies Trade receivables
17.9 0.5 18.3
19.3
98 Consolidated financial statements 102 Notes to the consolidated financial statements 150 Parent company financial statements 153 Notes to the parent company financial statements 166 The Board’s proposal to the Annual General Meeting for the distribution of funds 167 Auditor’s Report 171 Sustainability statement assurance report 173 Shares and shareholders 177 Ten years in figures 178 Taxes 179 Production capacities 181 Calculation of key ratios and comparable performance measures Corporate governance 183 Corporate governance statement 190 • Board of Directors of Metsä Board 194 • Corporate Management Team of Metsä Board
Prepayments and accrued income
0.5
Total
19.8
Key estimates and judgements
From associated companies and joint ventures Trade receivables
Fair value measurement The application of valuation models to measuring fair value requires judgement concerning the selection of the method to be applied, as well as valuation factors required by the chosen method that are based on the price and interest levels prevailing in the market on the end date of each reporting period. The most significant item of other investments that has been valued by using a valuation model is the Group’s investment in the shares of Pohjolan Voima Oyj. The price of these shares is determined based on the present value of discounted cash flows. Key factors affecting cash flows include the price of electricity, inflation expectations and the discount rate. The 12-month moving average of electricity futures prices has been used as the energy price for the first eight years. Subsequent prices are based on a long-term market price forecast. The carrying amount of the Group’s shares in Pohjolan Voima was EUR 218.3 million (253.0) on the balance sheet on 31 December 2024. The carrying value of other investments is estimated to change by EUR -8.1 million (-9.9) and EUR 8.5 million (10.3) should the rate used for discounting the cash flows change by 0.5 percentage points from the rate estimated by the management. The carrying value of other investments is estimated to change by EUR 55.6 million (61.6) should the energy prices used in calculating the fair value differ by 10% from the prices estimated by the management.
0.1
0.2
From others
Trade receivables
215.9
190.3
Impairment
-0.3
-0.6
EUR million
2024 232.9 239.7
2023 174.9 219.4
Total
215.5
189.7
Raw materials and consumables
Finished goods
Other receivables
40.8
36.1
Advance payments Inventories total
0.0
Prepayments and accrued income
3.5
5.9
472.6
394.4
From others total
259.9
231.7
Trade receivables and other receivables total
278.3
251.7
In 2024, reversals of write-downs on inventories amounted to EUR 1.0 mil- lion. At the end of 2023, inventories were written down to a net realisable value of EUR -1.0 million.
Receivables from Group companies are receivables from parent company Metsäliitto Cooperative and from other subsidiaries of the parent company. Derivative receivables are from Metsä Group Treasury Oy, a wholly owned subsidiary of Metsäliitto Cooperative.
196 Remuneration report 201 Investor relations and investor information
122
123
Consolidated financial statements | METSÄ BOARD ANNUAL REVIEW 2024
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