Review by the President and CEO

27 October 2022

Metsä Group’s business operations as a whole were very profitable in the third quarter. Russia’s unjustified attack’s effects on Europe’s economic development and energy supply had a negative impact on our business operations, decreased consumer demand, and increased cost inflation. The risks of the global economy and security policy remain the same. Despite the strong financial performance and the outlook for the fourth quarter, longer-term outlooks continue to be difficult to predict.

The wood market situation in the Baltic Sea region continues to be tight after Russian wood was withdrawn from the market in the spring. Wood trade has been active. The deficit in birch imports has been successfully compensated for with changes in which some of the birch used in production has been replaced with softwood.

The sawn timber market has seen a decrease in demand and prices during the third quarter after a long period of exceptionally strong performance. The situation is affected by the outlook of the European economy, which has caused a decrease in activity in the construction industry. Similar effects can be seen in the LVL and spruce plywood markets. However, LVL remains a speciality product in construction that replaces fossil-based materials, and it is currently in a strong growth phase, which compensates for the effects of the short-term market situation.

Demand and prices in the pulp market have continued to be very strong. The profitability of the dollar-denominated pulp pricing has also been supported by the strong dollar exchange rate.

The good demand for folding boxboard has continued, and the profitability of the business operations are supported by many global trends, the most important of which is the use of renewable materials to replace fossil-based raw materials. The market situation of kraftiners has also continued to be strong. The outlook in the European market shows some caution due to poor economic forecasts, which is typically reflected in product value chains as a decrease in inventory levels. However, the longer-term outlook has remained strong.

Tissue paper production has been burdened by the sharp increase in energy costs, which we have been unable to completely offset with product pricing. The demand volume has remained stable, which is typical for the product group, and Metsä Tissue’s product portfolio has been adjusted to the current cost structure, which has mitigated the impact of the cost pressures.

In the exceptional circumstances related to the availability of materials, labour and components, as well as strong cost inflation, the Group’s investments have continued with adjusted plans. The test runs for the Rauma pine sawmill began in May, and continuous three-shift production began at the end of the third quarter. The start-up of the new recovery boiler and turbine for the Husum mill will take place in the fourth quarter. The start-up of the Kemi bioproduct mill and Kemi kraftliner machine expansion are planned for the third quarter of next year. The 50% capacity expansion of the Husum folding boxboard machine will also begin at the end of next year.

The renewal of Metsä Tissue’s Mariestad mill in Sweden is pending the completion of an environmental permit. It is estimated that the investment decision process would be able to start in the first quarter of 2023.

Kaskinen has been selected as the location for Metsä Board’s planned new paperboard mill. An Environmental Impact Assessment has been started, and it is estimated that the environmental permits will be ready for a decision process during 2024.

Metsä Group is currently in a strong phase of growth and profitability development. Our long-term development requires the implementation of all three pillars of sustainability in our operations. We produce products from renewable raw materials for the everyday life needs of the people of the world. The functionality required by consumers must be produced by using as few resources as possible across our value chain. This principle guides our operational planning in product planning, industrial investment, logistics solutions and forestry.

Tangible measures to combat climate change are part of our daily work. We must bear our responsibility in safeguarding biodiversity, and constantly look for science-based operating models to safeguard forest environments.

Ilkka Hämälä
President and CEO
Metsä Group