Metsä Board grows paperboard business

Metsä Board’s strategy is to grow profitably its fresh forest fibre paperboard business and reduce its exposure in the declining paper businesses. Measures announced today strengthen the company’s market leadership in fresh forest fibre paperboards and enable an exit from the weak paper operations.
Thanks to these new measures Metsä Board’s total paperboard capacity will increase from 1,4-million to over 2-million annual tonnes by 2018.

“We have experienced good growth in our folding boxboard and linerboard businesses in recent years. Demand for our sustainable, safe and cost-competitive folding boxboards has recently increased especially in North America. In order to continue profitable growth, we must increase folding boxboard production capacity. After extensive planning work, we have decided to invest in the new folding boxboard machine at Husum, which is our biggest mill integrate including a large two line pulp mill, state of art coating technology, an efficient power plant, and own harbor. This is a very cost-competitive alternative to increase our capacity,” continues Joukio.

After the investment at Husum, Metsä Board’s total folding boxboard capacity will be approximately 1.3-million annual tonnes. The new folding boxboard capacity in Husum, approximately 400,000 tonnes per annum, is planned to be sold mainly to markets outside Europe, especially to North America, and also to the food service segment globally. Metsä Board entered the food service segment in early 2014. If the demand supply situation so requires in the coming years, Metsä Board has possibilities to adjust its production accordingly.

Metsä Board started to produce uncoated fully bleached fresh forest fibre linerboards at Husum mill in 2013 and expanded to coated grades in 2014. At the moment, the linerboard sales volume run rate is over 100,000 tonnes per annum. Husum’s linerboard annual production is planned to be increased to close to 300,000 tonnes by 2018. These volumes are expected to be sold both in Europe and North America increasingly also to new applications e.g. in food packaging.

Metsä Board plans to discontinue standard paper production at Husum mostly by the end of 2015. Total paper capacity planned to be ceased is approximately 600,000 tonnes annually. Personnel impacts will be clarified in the statutory negotiations that will be commenced immediately.

After the investment and the planned paper capacity closures, there will be two paperboard machines at Husum mill:

* Board Machine 1 with annual folding boxboard production capacity of about 400,000 tonnes; and
* Board Machine 2 (current Paper Machine 8) with annual linerboard capacity of about 300,000 tonnes.

Uncoated fine paper business reel production will be continued in the Board Machine 2 until the linerboard sales volumes have been grown to the full capacity of the machine.

The annual pulp production capacity at Husum is approximately 750,000 tonnes per annum including both softwood and hardwood grades. In addition to chemical pulp produced at the site, the new folding boxboard production at Husum will use majority of the BCTMP produced at Kaskinen mill in Finland from 2016 onwards.

Financial implications
Based on growth of the folding boxboard and linerboard businesses as well as the planned discontinuation of Husum’s paper production, Metsä Board’s annual sales is expected to remain rather stable. The positive impact of the new measures in Husum on Metsä Board’s annual operating result excluding non-recurring items is expected to be approximately €50-million compared to 1–3Q 2014 annualised performance.

Profitability improvement impact is expected to materialise mostly in 2017 and fully from 2018 onwards. Investment shutdown and accelerated depreciations of the paper capacity planned to be discontinued in Husum is forecast to impact operating result in 2015 negatively by roughly €20-million.

Linerboard and Paper business area’s 4Q 2014 operating result will include approximately €14-million in non-recurring costs related to planned discontinuation of paper production at Husum mill. Cartonboard business area’s 4Q 2014 operating result will include approximately €27-million fixed asset impairments due to the weak performance of Gohrsmühle mill.

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