Review by the President and CEO

9 February 2023

A year of crisis in Europe tested our ability to maintain business continuity. Overall, the Group’s business performance was excellent. Numerous development projects progressed on schedule and we are committed to sustainable business.

The war in Europe following Russia’s unjustified attack on Ukraine has overshadowed all Metsä Group’s operations. In the second quarter, we discontinued our business in Russia and adopted measures to introduce new raw material sources and open new product markets. Overall, business in Russia accounted for around three per cent of the Group’s sales. The discontinuation of Russian operations was felt most in our wood supply and Metsä Fibre’s sawmill operations. In the third quarter, Metsä Group gave up the special measures that had been in place during the coronavirus pandemic. The post-pandemic economic stimulus measures gave rise to cost inflation, which was further exacerbated by Russia’s attack on Ukraine, causing an energy crisis in Europe. Inflation pressures have affected profitability, especially in Metsä Tissue’s operations, and increased the costs of our large investments already underway. Overall, the Group’s result was excellent, as our business areas saw very good market demand throughout the year.

From limiting ecological damage to operations improving living environments

Our result in 2022 broke all records. Metsä Board’s paperboard business remained strong, and the prevailing business cycle supported the profitability of Metsä Fibre and Metsä Board’s pulp business. In the mechanical forest industry, Metsä Wood’s LVL and plywood business enjoyed higher profitability, boosted by the increasing sales prices in the second half of the year. The sawn timber market peaked in the first half of the year, with demand and prices returning to the level of the long-term trend in the fourth quarter. The demand for Metsä Tissue’s tissue and greaseproof papers normalised after the post-pandemic fluctuations, remaining at a strong level. The high energy costs posed a challenge to profitability, but we managed to partly transfer their impact to our product prices.

In changes affecting the global politics and economy, strong long-term customer relationships, combined with efficient operations across the value chain, create a firm foundation for profitability. Metsä Group is committed to continuous improvement in all areas of sustainable business. We are a signatory to the 2003 Global Compact initiative and have pledged to comply with the initiative’s Ten Principles concerning human rights, labour, the environment and anti-corruption. Renewable raw materials, and the products made from them resource efficiently to meet people’s daily needs, are part of the solution to global climate and environmental challenges. We must continuously raise our ambitions concerning the state of the environment. We must move from limiting ecological damage or preserving the status quo to operations that improve living environments and habitats.

Continuous development work

Metsä Group is committed to developing sustainable business based on northern wood. This requires our production units to be modernised so we can also promote resource efficiency in our production. In 2022, a new-generation sawmill, featuring new technology in operations and quality control, started up in Rauma. The sawmill is integrated into the pulp mill, which offers significant synergies in energy use and logistical efficiency. The energy production of the Husum pulp mill was renewed in the review period. The investment, initiated in December, will move the entire integrated mill closer to energy self-sufficiency. In Äänekoski, operations continued at the demo plant producing the Kuura® textile fibre. A demo plant producing the hot-pressed Muoto® fibre packaging, a joint project with Valmet, started up in the same mill area. The new Muoto product will also help replace fossil materials and improve the material efficiency of packaging. The investment decision on expansion of the Mariestad tissue paper mill was also made. The new LVL mill in Äänekoski is currently under preparation. Metsä Board has initiated a pre-engineering process for the folding boxboard mill investment in Kaskinen. The Group is also renewing its information systems. The investment in the ERP system began in 2021, and its first phase was deployed at the end of 2022. The project, running until 2025, will gradually improve the Group’s operational efficiency and ability to create new data-based functions for business control and customer service, for example.

These and many other development projects, combined with the management of extensive, ongoing business operations, require competent and committed personnel. Metsä Group wants to support long careers and enable its employees to continuously develop their competence and duties. Good and fair operations in the workplace community create an environment in which people feel good and cope at work, and are committed to achieving good results. We promote diversity, inclusion and equality in our workplace communities by identifying development needs and adopting development measures in our way of working.

Our success is based on our owner-members’ efforts to promote forestry

We are living in an era of global climate change and biodiversity loss. It is understandable that the interest in forest-related matters has continued to be strong, and that opinions critical of commercial forest use are highlighted. In Finnish forestry, attention to nature values has been an inherent part of forest management. Managers of family-owned forests, including most of our owner-members, have shouldered their responsibility for maintaining the good state of forests and improving it across generations. The volume of wood growing in Finnish forests has increased by 1.5 billion cubic metres to 2.5 billion cubic metres in the last 50 years. This development has been achieved by taking good care of forests and securing the preconditions for growth. We have protected larger areas, learned to better identify the habitats of threatened species, and developed forestry measures based on new knowledge. We must continue in the same vein. Let’s ensure the growth of trees in Finnish forests, see to the restoration of habitats, and contribute to maintaining Finland’s wellbeing. The diverse role of forests must be jointly discussed from different perspectives using facts to find increasingly better solutions.

Ilkka Hämälä
President and CEO
Metsä Group