Metsa Board Oyj B reported its financial results for the first quarter of 2025, revealing stable sales figures and a decline in operating results. The company’s shares fell by 1.81% following the announcement, reflecting investor concerns over increased costs and a weaker operating result forecast for the second quarter. According to InvestingPro data, the company maintains strong fundamentals with a Financial Health Score of 2.15 (FAIR), despite recent challenges. InvestingPro analysis suggests the company is currently undervalued compared to its Fair Value.
Key Takeaways
- Metsa Board’s Q1 2025 sales remained stable at €481 million.
- Operating result declined nearly 30% to €23 million.
- Stock price decreased by 1.81% after the earnings call.
- Net debt increased to approximately €400 million.
- The company anticipates a weaker operating result in Q2.
Company Performance
Metsa Board maintained stable sales in the first quarter of 2025 at €481 million, but faced a significant drop in its operating result, down nearly 30% to €23 million. The company struggled with increased costs related to wood, logistics, and employee expenses, which offset the benefits from market pulp sales and lower energy and chemical costs. Despite these challenges, Metsa Board remains the largest provider of folding boxboard in the U.S., with robust customer relationships.
Financial Highlights
- Revenue: €481 million (stable compared to the previous quarter)
- Operating result: €23 million (down 30% year-over-year)
- Comparable return on capital employed: 4% (target:12%)
- Net debt: €400 million
- Leverage: 2.4 (below targeted maximum of 2.5)
Market Reaction
Following the earnings announcement, Metsa Board’s stock price fell by 1.81%, closing at €3.318. This decline reflects investor concerns about the company’s rising costs and the anticipated weaker performance in the upcoming quarter. The stock is currently trading closer to its 52-week low of €2.954 than its high of €8.105, indicating a challenging market environment. InvestingPro analysis shows the stock has experienced a significant 33.16% decline over the past six months, though analysts remain optimistic about future profitability. Get access to 7 more exclusive InvestingPro Tips and comprehensive valuation metrics with an InvestingPro subscription.
Outlook & Guidance
Looking ahead, Metsa Board expects paperboard delivery volumes in the second quarter to remain at first-quarter levels. However, the company anticipates a weaker comparable operating result, with potential market-related production curtailments, especially in folding boxboard. The repair shutdown of the Metsofibre Chemi bioproduct mill is projected to negatively impact Q2 results by €10 million.
Executive Commentary
CEO Esa Kaikkonen highlighted the company’s focus on strengthening cash flow amid challenging market conditions. "Despite these challenges, we aim to stay in the U.S.," Kaikkonen stated, emphasizing Metsa Board’s commitment to maintaining its market position. He also noted the importance of continuous improvement to stay competitive: "Our short-term focus is on strengthening our cash flow."
Risks and Challenges
- Rising costs of wood, logistics, and employee expenses.
- Potential production curtailments in the folding boxboard segment.
- Impact of U.S. tariffs on sales and profitability.
- Macroeconomic pressures affecting demand in key markets.
- Currency fluctuations impacting financial performance.
Q&A
During the earnings call, analysts inquired about the U.S. market dynamics and tariff challenges. Metsa Board confirmed its hedging of currency exposure for approximately eight months and discussed potential market capacity adjustments. The company also addressed concerns about product substitution and its impact on future sales.
Metsa Board’s Q1 2025 results highlight the company’s resilience in maintaining stable sales amid rising costs and market challenges. However, the anticipated weaker performance in the second quarter and ongoing operational adjustments will be critical areas for investors to watch. For deeper insights into Metsa Board’s financial health and future prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro, covering detailed analysis of over 1,400 stocks worldwide.
Full transcript - Metsa Board Oyj B (METSB) Q1 2025:
Esa Kaikkonen, CEO, Metzaboard: Good afternoon, everyone, and welcome to the presentation of Metzaboard’s First Quarter Results. My name is Esa Kaikkonen. I’m Metzaboard’s new CEO starting from April 7. Together here with me, I have our CFO, Hendrik Cederholm and Head of Investor Relations, Kati Sundstrom. Prior to elaborating the results, let me briefly introduce myself.
The Forest Industrial and Metagroup are very familiar to me as I have held various roles at Metagroup over the past twenty seven years. For example, I have been responsible for Metzagroup’s legal affairs and strategy and for several years, almost or more than ten years, I also led Metzagroup’s wood products and tissue businesses, Metzavood and Metzatissue. Despite the current challenging environment, I’m very optimistic about the future. I see great opportunities for Metzaboard and believe we can enhance our competitiveness and profitability in the evolving paperboard market. At this time, I would also like to thank my predecessor, Mika Jokia, who served as Metaboard’s CEO since 02/2014.
Mika’s expertise and customer relationship skills have been crucial in transforming Metaboard into a leading paperboard producer. But now, let’s start with the Q1 summary. Paperboard sales improved from the previous quarter, mainly driven by increased delivery volumes. Average sales prices of paperboards remained roughly at the same level as in 2024. As always, Q1 did not include any planned maintenance, which in turn increased production.
Production volumes grew not only from the previous quarter, but also compared to the corresponding period last year. However, it’s good to bear in mind that last year at this time, we were affected by political strikes in Finland. Increased production activity led to higher inventory levels, which in turn tied up more working capital. Combined with the prolonged weak profitability, this impacted the operating cash flow, which was negative. Henry will address this a bit later.
During the quarter, we decided to close our Taco mill permanently and enhance operational efficiency at our Curo mill to improve the company’s competitiveness and profitability. These actions will finally cut two zero eight jobs and we will do our best to help those affected find new employment within or outside Metzagroup. We expect our annual EBITDA to improve by roughly €30,000,000 starting mainly from the fourth quarter of this year. Customer deliveries will not be affected as we have enough capacity to meet current demand after the latest investments in Husum. TACO’s production is moving mainly to Kura, which has previously served as a backup mill for TACO and its unique products.
And once again, we performed exceptionally well in the CDP evaluation across all the three categories: climate change, forests and water security, achieving an A score in each. Then the beginning of the year has marked by U. S. Tariffs, which naturally have a significant impact on Metaboard’s business. Let’s take a closer look at the impacts.
First, I must emphasize that we have an established market positions in The U. S. For both folding boxboard and coated kraftliners. Over the decades, we have been building our foothold and developing long lasting customer relationships. We are the largest provider of folding boxboard as there is no local supply of that material.
There are very few alternatives to coated white kraftliners. Our customers value the high quality of our paper boards, our efficient and sustainable supply chain and comprehensive services. In 2024, our sales to The U. S. Were €430,000,000 and in total, we delivered 365,000 tonnes of paperboard.
Currently, we are negotiating with our customers to address the impact of these tariffs on the prices of our paperboard. We trust our customers to understand the impact of the tariffs. Exact financial and or operational impacts are still difficult to estimate as there is a high level of uncertainty regarding the final amount and duration of tariffs. Despite these challenges, we aim to stay in The U. S.
We are committed to maintaining relationships with our long term customers, and we are also seeking new businesses and growth. Despite of a slight improvement, the overall demand for paperboards remained moderate and far from the levels seen during the pandemic or pre pandemic times. First quarter deliveries this year were quite similar to last year. After a quiet Q4, order inflows initially picked up, but slowed down towards the end of the period. It’s also worth noting that last year’s deliveries were somewhat impacted by political strikes.
In total, volumes remained roughly at the same level as in the corresponding period, but increased by 7% from the previous quarter. And here is the paperboard sales split by the region and product. FPP volumes to Americas increased but remained flat in the EMEA. The European folding boxboard market is still affected by the continued high level of paperboard imports from Asia, mainly to Turkey, Russia and Middle East, so the impact is indirect. White kraftliner deliveries to The U.
S. Decreased, but increased in EMEA. Metsoporates market pulp delivery volumes decreased compared to the last year. The most significant decline was in PCTMP deliveries to the APAC region, where demand has been weak for some time. At the same time, MEZO Fibers deliveries increased by almost 30%.
The growth is partly explained by new available capacity from Chemi as well as last year’s strikes. In Europe, the demand for softwood market pulp was fairly stable. In China, demand weakened towards the end of the quarter. And now the sustainability development. The biggest changes were seen in a drift and energy efficiency, and unfortunately, both developed negatively.
TRIF increased to 5.6 from the full year 2020 figure of 3.5, indicating that we still have room for improvement as our target is zero accidents. Energy efficiency weakened as well, mainly explained by production curtailments over the last twelve months. However, positive development was seen in the share of certified wood fiber, which was 94%. But now, I will hand over to Henrik to present the financials.
Hendrik Cederholm, CFO, Metzaboard: Thank you, Eesa, and good afternoon, everyone. Our first quarter twenty twenty five sales remained stable compared to the corresponding period last year at €481,000,000 The increased delivery volumes naturally contributed to the growth from the previous quarter. Unfortunately, profitability continues to show no notable improvement. The operating result was €23,000,000 almost 30% down from the corresponding period last year. Now a closer look at the items that affected the comparable operating result in the first quarter.
On the positive side, there’s an improved result share from Metsofibre. Their profitability was supported by market pulp sales as both delivery volumes and sales prices were clearly better than in the comparison period. The sawmill business also developed positively. Additionally, our operating result improved due to lower energy and chemical costs. On the negative side, we had significantly higher wood and logistics costs as well as higher employee costs and depreciation.
In the first quarter, items affecting comparability totaled €27,000,000 mainly related to the asset write down of the Taco mill. The comparable return on capital employed in Q1 remained low at 4%. Our target is to reach at least 12%. And capital employed at the end of the period was €2,500,000,000 And now cash flow, which has been unsatisfactory recently. The downward trend and negative figure for Q1 are mainly explained by prolonged weak profitability and increased working capital.
If we look back to 2023, the rapid decline in paperboard demand led us to curtail production. This freed up working capital resulting in strong cash flow development. And in 2024 with increased activity, the direction was the opposite. It’s also important to note that dividends from MEZZa Fiber significantly impact our operational cash flow, especially during Q1 when they are typically paid. This year, no dividend was paid.
We are having a strong focus on reduction of operating working capital, and thus we expect the second half to be stronger in generating operating cash flow than the first half. Free cash flow was also negative both in the quarterly review and on a twelve month rolling basis. The reduced investment level will impact the future development of free cash flow. Our net debt increased and was roughly €400,000,000 at the March. This year, our dividend payment took place already in the first quarter totaling €25,000,000 Leverage was at 2.4, still below the targeted maximum level of 2.5.
However, our financial situation remains solid despite the leverage increase, which has mainly been impacted by weakened profitability. And that’s all from the financials. So now I’ll hand back to Esab.
Esa Kaikkonen, CEO, Metzaboard: Thanks, Hendrik. And now let’s move on to the investments. The well, as we have all the major investments now behind us, we expect returns from them in the coming years. Our main ongoing investments now is the paperboard machine renewal in Simpele, which we expect to be completed in the second half of this year. And in pre engineering, the main projects are new pulp drying machine in the Husum pulp mill and production conversion from white kraftliner to foodservice and greaseproof papers in the Husum board mill.
This year, we expect our total investments to be around 100,000,000 to €150,000,000 out of which maintenance some 50,000,000 to €60,000,000 And now the near term outlook. Geopolitical challenges in the operating environment, most recently the tariffs imposed by The United States, maintain overall uncertainty in the market. This also complicates the predictability of our future paperboard sales and earnings development. This uncertainty is reflected in consumers’ buying behavior, which remains quite cautious. In the second quarter, we expect our paperboard delivery volumes to remain at the first quarter level.
Variable costs, excluding pulp, are expected to remain stable. The second quarter will include more planned maintenance and shutdowns than in the first quarter. And in addition to that, the ongoing quarter will face more market related production curtailments. In addition, Metsofibre’s Chemi bioproduct mill will have a roughly one month repair shutdown as its units damaged in a gas explosion at the mill’s evaporator will be replaced with the new ones. We expect this shutdown to have a negative impact of €10,000,000 on Metsoboard’s operating result in April, including the impact from Metsofibers’ result share.
And based on these assumptions, we expect our Q2 comparable operating result to be weaker than in Q1. And finally, let’s have a summary. We continue to face a challenging market situation. This is primarily due to The ongoing US tariffs and oversupply in close by markets in paperboard and weak consumer demand. Despite these hurdles, I still want to highlight that Metaboard’s financial position remains solid, although we have recently carried out massive investments.
It’s also important to remember that as the market situation improves, we expect these investments to generate returns for us. Our short term focus is on strengthening our cash flow. We are implementing measures to optimize our operations and improve efficiency across all levels. If paperboard demand beacons further, we can respond with temporary mill shutdowns and employee layoffs. We expect our cash flow to be stronger in the second half than the first.
Additionally, we are committed to enhancing the competitiveness of our mills and products. Continuous improvement is the key to staying ahead in this competitive landscape, and we are also planning actions to improve our profitability. And with that, we end our presentation and are now ready for your questions. Thank you very much.
Moderator/Operator: The next question comes from Linus Larson from SEB. Please go ahead. Linus Larson from SEB, your line is now unmuted. Please go ahead.
Linus Larson, Analyst, SEB: Starting off with The Americas, you saw different volume trends in folding boxboard and white kraftliner. Thank you very much. My first question relates to Americas and volumes. I wonder if you could shed some light on the fact that in folding boxboard, you saw growing volumes year on year in the quarter, while you saw declining volumes in white kraftliner in Americas in the quarter. Could you just talk us through the dynamics there, please?
Esa Kaikkonen, CEO, Metzaboard: Yes. There are some declines in WKL volumes in the first quarter compared to the Q4, but that was mainly due to the fact that the customers were actually ordering more in Q4 and because they were preparing themselves the potential strike that never took place in Finland.
Linus Larson, Analyst, SEB: Okay. If I put it this way, if you look at your order inflow right now, let’s say, what are the trends in The U. S. Market for folding boxboard and white linerboard, please?
Esa Kaikkonen, CEO, Metzaboard: Well, currently, we are, of course, in the discussions with our customers, and we cannot shed too much light on this topic for the time being. But clearly, of course, this situation related to tariffs is actually making our customers more cautious in their ordering. That has a negative impact currently. But of course, currently, we cannot predict that what will be impact during the quarter. So we have seen some negative negative trend there, but too early to to make any conclusions.
Linus Larson, Analyst, SEB: Okay. And then maybe just one more question on volumes. Generally, you produce in excess of shipments on the group as a whole for paperboard in the first quarter, and I appreciate that may be in preparations for maintenance and so forth in the second quarter. But when you guide on the maintenance impact and the repair at Kemi and what that may implicate for you in the second quarter, does that include also the fixed cost absorption effect that you may have from this mismatch between production and shipments that we see in the first quarter? Or does that come on top?
That’s my question.
Hendrik Cederholm, CFO, Metzaboard: Yeah. I can confirm that that GEMI figures includes that impact as well.
Linus Larson, Analyst, SEB: Okay. So nothing in addition to what you say on no additional absorption impact in the second quarter?
Hendrik Cederholm, CFO, Metzaboard: Well, not regarding Chemi anyway, that’s what I was just confirming. So Chemi is included.
Linus Larson, Analyst, SEB: Okay. Thank you. That’s helpful.
Moderator/Operator: The next question comes from Joni Sandvall from Nordea. Please go ahead.
Joni Sandvall, Analyst, Nordea: Yeah. Thanks for the presentation and taking my questions. I have a couple of these. You mentioned that you are expecting, more market related production card elements. Can you specify if this is more on the folding boxboard or then on the liner side?
Esa Kaikkonen, CEO, Metzaboard: Well, currently, it is more in the folded boxboard that we are planning some further curtailments. But the amount is, of course, dependent on the, let’s say, order inflow in the coming weeks.
Joni Sandvall, Analyst, Nordea: Okay. Okay. That’s clear. Then if we are excluding now the now The US US tariff here and looking more on the Europe, could you give any indications how you expect pricing environment to develop in Q2 compared to Q1?
Esa Kaikkonen, CEO, Metzaboard: Well, regarding the prices, we are not commenting on the forward looking prices as such. But you’ve seen that in the past year, the prices have been stable. And I’m well, looking at it forward, there is, of course, market market, let’s say, is evolving every day, and we are following it closely. But we are not taking any any forward looking looking view on the on the prices.
Joni Sandvall, Analyst, Nordea: Thanks. And maybe lastly on the guidance still on Q2. Can you give any indication how you are currently expecting Meta Fiber, so associated income to evolve going into Q2?
Hendrik Cederholm, CFO, Metzaboard: Well, unfortunately, we are not giving sort of separate guidance on Metafiber results here. So that we only give guidance on Metaboard level.
Moderator/Operator: The next question comes from Andrew Jones from UBS. Please go ahead.
Andrew Jones, Analyst, UBS: Hello. Just a question or a couple of questions. Firstly, on volumes into The U. S. I’m curious what stops buyers shifting to using, say, SBS as an alternative to some of your products that’s produced domestically, and in particular, obviously, SAPI are ramping up a big new mill, which won’t be facing those tariffs.
Again, like, from a technical And then well, I’ll pause and ask the next one after the answer.
Esa Kaikkonen, CEO, Metzaboard: Well, I have to, let’s say, ask you to repeat the second question, and I’m I’m guessing the first question bit that how it was, but you were asking the, let’s say, substitution of FBB by SBS and and the potential of that, we believe that what our value proposition in The U. S. Market is strong. We believe that we have a really good, let’s say, let’s say, base there and customer relationships and also very, very robust technical service. Having said this, we believe that those customers that we have over the decades procured in FPB and WKL as well remain as our customers also going forward, and we can even grow there.
Of course, giving the uncertainty on the tariffs, the amount of the tariffs and how long they last, then that’s another question. But the substitution effect and the threshold for customers to change back to the SPS is dependent on the, let’s say, segment where the customer is operating. And I’m not going to the I’m I’m not going to the specifics there that that but currently, we trust that our customers are actually understanding the situation that we are in. This question, I I I must ask you to repeat. Sorry about it.
Andrew Jones, Analyst, UBS: Yeah. And I was going to ask the second question after your answer there. So, second thing would be, I guess, I mean, you obviously acknowledge the potential for volume loss in The US, And we’ve obviously got Hulu ramping up, competing on the FBB side in the coming months. I mean, these are obviously structural changes. Now obviously, utilization is a lower in the group history.
I’m curious whether you think the closure of the taco mill is enough to rebalance the market? And could there be the potential for more closures? And I guess, broader question, how does your vision for the company differ maybe from your predecessor? And do you think he went far enough with some of the capacity closures?
Esa Kaikkonen, CEO, Metzaboard: Yes. Well, I think that the changes in the capacity going forward will not give any estimate. I think that we have been actually making this independently and seeing that what makes us stronger in the market, and we have been balancing our offering accordingly. And we are actually then getting efficiencies of analyzed efficiencies of 30,000,000 roughly out of this. And currently, I believe that it will be good to balance the market from our part if you are looking at our customers.
So in that regard, I think that I cannot comment at this point of time more on on supply demand balance from our perspective. We believe that the Taco closure was good strategic move and and a bold move given the current current situation. We we were just actually ramping up also Husum and the new capacity there. So it they they were related those two two decisions.
Andrew Jones, Analyst, UBS: Okay. And just one third one, just on the FX movements. You said there isn’t a headwind into the second quarter. Looking at your sort of sensitivities that you’ve given in the past, I would have thought there’d be a decent headwind going forward for the rest of the year given where currencies have moved. I mean, you basically hedging the majority of your ForEx exposure in the sort of near in the very near term?
And should we see a greater FX headwind maybe into the second half?
Hendrik Cederholm, CFO, Metzaboard: Yes. If I take this one. So we are hedging currently at about eight months forecasted currency flows, which means that we are almost fully hedged already for this year. And without going to the details, I can say that overall effective FX rates for this year are pretty well in line with those of last year. So we will actually be seeing a little bit more favorable USD effective rates on the second half of this year than than on the second quarter.
So so all all in all, the big picture is that the year on year impact from from FX will be actually quite small.
Andrew Jones, Analyst, UBS: Okay. But potentially, 2026 would have a bigger impact once some of those hedges roll off, I guess.
Hendrik Cederholm, CFO, Metzaboard: That that’s a fair statement. If if the spot rates stay where they are today, particularly in the US dollar, that’s the correct correct assumption.
Andrew Jones, Analyst, UBS: Okay. Thank you.
Esa Kaikkonen, CEO, Metzaboard: Okay, everyone. There is no further questions. So thank you very much on our behalf for the session and the questions. We’ll get back to you in the next quarter.
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