METSÄ BOARD Annual review 2024
Strategic risks
mill, an investment programme was launched in 2024 to improve the performance of barrier boards and expand end use areas. The amount of plastic was successfully reduced in the PE-coated folding boxboard produced at Husum without compromising the paperboard’s barrier properties. Pre-engineering for the folding boxboard mill in Kaskinen aimed for world-class production efficiency and a further decrease in raw material, energy and water consumption per tonne produced. The investment was called off, but the results of the pre-engineering work have been used in the renewal of the Simpele board mill, launched in 2024. The pre-engineering results will also serve other projects still in the planning phase, such as the development of Kyro barrier boards. Jointly with Soilfood, Metsä Board is studying the utilisation of fibre- based side streams from paperboard mills in animal bedding. Novel bedding fibres are a renewable alternative for peat, commonly used as animal farms. Metsä Board’s Excellence Centre in Äänekoski offers an active collaboration environment for the research, innovation and testing of packaging materials and solutions. In 2024, the Excellence Centre hosted 49 development workshops, organised jointly with customers, focusing on topics such as reducing the environmental impacts of packaging. Some of the workshops were organised virtually. Metsä Group and Fortum’s ExpandFibre cooperation project concluded in 2024. It was part of Business Finland’s challenge for leading companies and received a funding decision in 2020. Metsä Board’s share in the project involved the development of the packaging sector, and the work benefited from the Excellence Centre’s cooperation network and barrier board development work. In 2024, Metsä Board’s research and development expenses totalled EUR -7.4 million (-7.3), or 0.4% (0.4) of sales. The costs include direct expenses, excluding depreciations and operational investments. Most significant risks and uncertainties Metsä Board’s risk management is systematic and proactive, and it assesses and manages business-related risks, threats and opportunities. The company’s Board of Directors is responsible for the company’s risk management and approves its risk management policy. Metsä Board systematically assesses its strategic, operational and financial risks. Key risks are accounted for in the planning processes and they are prepared for with management measures. In addition, the Corporate Management Team reviews the most significant risks as part of its management team work. Risks that exceed Metsä Board’s risk-bearing capacity have been transferred with insurance, derivatives and other contracts to insurance companies, banks and other counterparties. Significant damage risks are covered with the Group’s property and interruption, liability, transport damage and credit insurance policies. Identified risks and the means by which they are managed are reported to the company’s Board of Directors and the Board of Directors’ Audit Committee at least twice a year. The following risks and uncertainties with a potential impact on Metsä Board’s business operations and profitability were identified in the risk assessments carried out in 2024.
Any other potential changes in the industrial and trade policies of leading industrialised countries, the materialisation of geopolitical risks or an esca- lation of geopolitical risks may lead to more extensive measures restricting trade or the use of international sanctions. The possible consequences of these include a further slowdown in the recovery and growth of the global economy, and even a curtailment of global trade flows. Any sanctions and restrictions on international trade may affect the demand for Metsä Board’s products and the company’s profitability. Pulp price risk Metsä Board is more than self-sufficient in pulp through its 24.9% holding in Metsä Fibre. The market price of pulp strengthening (weakening) by 10% would have a positive (negative) impact of roughly EUR 50 million on Metsä Board’s operating result. This sensitivity includes the impact on the holding in Metsä Fibre. In the global pulp market, structural changes in customers’ pulp use, increasing competition and new production capacity may have a negative impact on the demand and price trend of market pulp. Impact of the Chinese economy China is an important market area especially for Metsä Board’s associated company Metsä Fibre, as nearly half its market pulp is sold to China. Chi- nese economic growth has slowed down due to challenges in the country’s real estate market and tight corporate regulation. Domestic consumer demand is also weak, and central government’s recovery measures have not halted the slowdown in growth. In addition, demographic factors and increasing geopolitical tension, especially between China and the US, may affect China’s future economic development. Should relations between the EU and China deteriorate, or the Chinese economy and consumer demand slow down further, these may have a negative impact on the demand for market pulp or paperboards on the Chinese market. Problems in China’s industrial sector may increase the problems and costs of global delivery chains. Sustainability Sustainability-related risks and their impacts on the company are sepa- rately discussed in this report’s Sustainability statement.
In addition, the availability of transport capacity and a steep increase in market prices may negatively affect the company’s profitability. Attacks on ships in the Red Sea are hampering sea transports between Europe and Asia, causing additional costs and delays in deliveries. Prolonged instability in the region’s safety situation may have a negative impact on the product deliveries of Metsä Board and its associated company Metsä Fibre. Changes in exchange rates may affect the costs of some production inputs. The Group aims to hedge against these risks by making long-term supply agreements and related derivatives contracts. Concentration of operations in a limited geographical area Seven of Metsä Board’s eight production units are located in Finland, and one of them is located in Sweden. Finland has a history of labour disputes in both the forest industry and the distribution chain of forest industry products. These may have a negative impact on production volumes and customer deliveries and weaken the company’s competitiveness and profitability. Labour disputes in Sweden may also interfere with Metsä Board’s production and customer deliveries and have a negative impact on the company’s business operations. Continuity risks The continuity of mills’ production may be impacted by large-scale fires or explosions, significant equipment malfunctions, serious accidents, extreme weather phenomena and environmental damage, for example. In addition, labour disputes, cyberattacks and malware, and the ensuing long-term malfunctions in IT systems, employees falling ill due to infectious diseases, availability issues concerning the most important raw materials and disruptions in the logistics chain may suspend the entire business or parts of it. Interruptions in production or the supply chain may influence the continuity of customer service and delivery reliability. If such interruptions continue for a long time, the resulting financial losses may be substantial and result in the permanent loss of customers. To protect itself against these risks, the company has prepared contingency plans and obtained insurance protecting property and business. The amount and costs of property damage and business interruption, as well as the approval of related compensation, may involve uncertainties. The availability and pricing of renewable insurance may involve uncertainty and possible additional costs. Business development The development and growth of Metsä Board’s business requires strategic choices that involve risks. The uncertainties in question involve the selection and timing of growth investments, for example, as well as the development of sales and the customer portfolio. The growth of the paperboard business and the introduction of new production to the market are dependent on successful sales. The commercialisation of new products involves uncertainties that, should they be realised, could have a negative impact on the demand for Metsä Board’s products and the company’s prof- itability. Increasing sales on a global scale also involves cost and exchange rate risks. The business is also developed by modernising the production tech- nology, efficiency programmes, product development and harmonising business processes. If development projects and investments significantly exceed their costs, or if their completion is delayed or their production
Development of the world economy The uncertainty surrounding global development and growth continues. Especially in the euro area, economic growth has remained quite weak despite the recovery, and it is clearly slower than growth in the US. Con- sumers’ low confidence in the economy and weaker purchasing power have reduced the demand for consumer products. In 2024, slowing inflation and decreasing interest rates boosted consumers’ purchasing power to some extent, but consumers are still cautious in their purchase decisions, and consumption focuses on services. If prolonged, the situation may reduce the demand for Metsä Board’s products and negatively affect the compa- ny’s profitability. In 2024, central banks cut their interest rates – more so in Europe than in the US. While interest rate cuts are expected to continue, rates may also remain at the current level or even increase. This could have negative impacts on the economy, the most significant of which are a continued weak growth outlook and a prolonged risk of recession, and a further decrease in consumers’ purchasing power. All of these factors may have an unfavourable impact on demand for Metsä Board’s products, business continuity or the company’s profitability. Changes in the competitive and operating environment Metsä Board operates in an industry where the balance between supply and demand, and any changes to it, affect the demand for and prices of end products. An increase in competitors’ capacity or the expansion of product ranges may reduce the price level and negatively affect Metsä Board’s profitability. Paperboard imports from Asia to the Middle East, Tûrkiye and South America have rapidly increased. This has also affected the market balance in Europe. If paperboard imports increase faster than demand, they could also cause an imbalance in the company’s other market areas and affect the prices of end products and the company’s profitability. Any significant changes in exchange rates may influence products’ market balance and companies’ competitiveness. Changes in regulation, such as the EU’s climate and environmental policy and tighter new requirements to limit carbon dioxide, sulphur or other emissions, may weaken Metsä Board’s profitability or hamper business continuity. The acceptability of single-use food and food service packaging involves regulatory risks. Geopolitical risks The US accounts for more than a fifth of Metsä Board’s sales. The import tariffs planned by the country’s new administration, aimed at protecting the domestic economy and companies, could weaken Metsä Board’s relative competitiveness and thus the profitability of the paperboard business. Russia’s continued military aggression in Ukraine has maintained global geopolitical tension and has had a negative impact on the economy. The impact of Russian sanctions and countersanctions, as well as the risks caused by the crisis, affect areas such as the costs and availability of production inputs, energy infrastructure and cybersecurity. The ongoing conflict in the Middle East is causing uncertainty in the global business environment, and its prolongation or extension may have a negative impact on world trade, the supply chain and raw material prices.
Business operations and value creation 2 This is Metsä Board 4 CEO’s review 6
taker-
Strategy and financial targets
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
G – Governance
Annexes to the Sustainability statement
suunnitelma 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
ksien
Operational risks
Cost and availability risks of raw materials Significant or unforeseen changes in the prices of Metsä Board’s most important raw materials – wood, energy and chemicals – and any problems with their availability, may reduce profitability, threaten business continuity, and put the implementation and profitability of planned development investments at risk. The discontinuation of wood supply from Russia has made the pulpwood market situation in the Baltic Sea area tighter and has led to a steep increase in the price of wood. Challenges in the availability of wood could affect production continuity and thus the sales of the company’s products and its profitability. Should the conflict in the Middle East spread, it may affect the price of oil and natural gas. Changes in the prices of electricity, natural gas or chemicals, or challenges in their availability, as well as changes in the prices of emission allowances, may have a negative impact on Metsä Board’s profitability.
196 Remuneration report 201 Investor relations and investor information
16
17
Report of the Board of Directors | METSÄ BOARD ANNUAL REVIEW 2024
Powered by FlippingBook