Good afternoon, everyone, and welcome to Metsä Board's January-September results presentations. My name is Katri Sundström, and I am responsible for investor relations. With me today I have CEO Esa Kaikkonen and CFO Anssi Tammilehto, who will take you through the results. As usual, we will open up the lines for questions at the end. You can also send questions through the chat during the presentation. Before we begin, just a quick reminder that today's presentation includes forward-looking statements and the usual disclaimer applies. With that, I will hand over to Esa.
Thank you, Katri. Good afternoon, everyone. Let me start with the key messages. First, our Q3 profitability continued to improve despite extensive shutdowns and continued cost pressures. Second, the paperboard market balance improved, supporting higher prices as well. Third, our transformation program continued to deliver and strengthen our competitiveness. Finally, commercial momentum continued to build as we have been able to benefit from some shifts taking place in the market. Those are the key messages that we have today. Turning to the paperboard market, the overall market balance has improved as I stated earlier. In white kraftliners, market conditions have strengthened during the 2026. Capacity closures, especially in North America, have tightened supply and supported containerboard price increases. At the same time, demand has improved and supply has tightened in Europe, while cost pressures have also supported price development.
In folding boxboard, demand has remained roughly stable during the year. Capacity closures in Europe and North America have improved the supply-demand balance. The combination of a better market balance and continued high costs have supported pricing. It is important to remember, we have been able to benefit from these market shifts as well. Our share of the European folding boxboard market increased to 29% in September from 25% at the end of Q2. Paperboard deliveries remained stable from the previous quarter while average selling prices increased. Strong order book supported higher operating rates at our finished paperboard mills. At the same time, extensive maintenance shutdowns and market-related downtime at Husum weighed on our profitability. Despite these headwinds, comparable EBIT improved for the fourth consecutive quarter, increasing from EUR 3 million in Q2 to EUR 6 million this quarter. Comparable EBITDA remained stable at EUR 30 million.
Our transformation program continued to progress, reaching an annual EBITDA run rate improvement of EUR 148 million. We also continued our commercial actions to strengthen our market position further. Overall, the direction is encouraging, but there is still significant work ahead to improve our profitability. Let us move on to our business areas, starting with the consumer packaging. Q3 delivery volumes remained stable both year-on-year and from Q2. Year-to-date volumes declined mainly in the Americas, but recently volumes have stabilized also there. Deliveries in Europe remained stable, increasing Europe's share of our overall sales mix. On the positive side, average selling prices increased. Moving on to the retail packaging. Volume development has remained solid. Year to date, white kraftliner deliveries were up by 7%, with growth in both Europe and the Americas.
We continue to hold a strong position in coated white kraftliner in North America, where substitution options are limited. We have also increased our sales of coated white kraftliners in Europe. Also in white kraftliners, average selling prices have increased. Market pulp remains still challenging of our, well, most challenging of our three businesses. Demand and pricing remained subdued, although supply has tightened following production curtailments and capacity closures. Metsä Fibre's Joutseno mill has remained in market-related downtime since the end of March, also affecting our BCTMP operations at the site. Year to date, pulp deliveries declined both at Metsä Board and Metsä Fibre. With that, I will hand over to Anssi to take a closer look at the financials.
Thank you, Esa. Good afternoon, everyone. Let us now turn to the financials and have a bit of a deeper look at the numbers. The third quarter sales were EUR 402 million, down from the previous quarter and from the same period last year. When looking at the first nine months, sales were EUR 1.23 billion, which is almost EUR 150 million lower than last year. This decline was quite evenly split between lower volumes, lower selling prices, and adverse currency effects. Despite the lower sales, profitability continued to improve, and the comparable operating profit increased to EUR 6 million, marking the fourth consecutive quarter of improvement. This is very encouraging, especially considering the extensive maintenance and market-related shutdowns that Esa already mentioned. When we then look at the year-to-date comparable operating results, it improved by more than EUR 40 million to close to breakeven levels.
Lower prices and adverse currencies were significant headwinds, but these were more than offset by substantial improvements in the variable and fixed costs. Also, lower wood and chemical costs contributed to the improvement. Together with the measures that were implemented under the transformation program, the closure of the Tako mill and lower maintenance costs, these were also items that improved the situation, and also the fixed costs were at a lower level compared to the previous year. If we look at the quarterly comparisons year on year, our comparable operating result improved by around EUR 50 million, again, driven mainly by substantially lower variable and fixed costs. Higher paperboard deliveries and production also contributed positively on the year-over-year comparison. When we then look at the quarter-to-quarter comparison, a slight improvement as shutdowns weighed on volumes. You can see the red bar over there.
This was largely offset by lower variable costs that also included roughly EUR 10 million of tariff refunds. Other items also contributed positively, with emission allowance sales around EUR 5 million higher than in Q2 as the levels continued to be feasible. If we look at the transformation program in a bit more detailed level, the program continues to deliver. As mentioned, it is a 10-quarter program, and it is delivering already tangible earnings benefits. By the end of Q3, the implemented actions represented an annualized EBITDA run rate of around EUR 150 million against our EUR 200 million target overall. The realized EBITDA impact was EUR 54 million in the quarter, bringing the cumulative impact to almost EUR 100 million overall. It is good to note, of course, that the cost savings are measured against the average cost structure of the period second half 2024 to first half 2025.
Of course, we continued to reduce variable and fixed costs and improved our efficiency in both sourcing and logistics. Good to note also that the commercial actions are progressing with the earnings impact expected to become more visible next year. To cash flow, our cash generation improved in the third quarter, and this was supported by the recovery in both earnings and a positive contribution from working capital, namely inventories. Cash flow from operations was EUR 22 million, and the cash flow after investing was even stronger at EUR 32 million, reflecting the very low level of investments during the quarter as we remain focusing on the capital discipline and other positive investment cash flow items.
Looking ahead to Q4, cash flow is expected to weaken, reflecting an increase in working capital, as we don't want to jeopardize our customer commitments, mostly related to retail packaging and the Kemi maintenance shutdown. If we have a look at the balance sheet items, our liquidity still remains strong at EUR 546 million, and this also includes the fully undrawn EUR 250 million revolving credit facility. Our interest-bearing net debt is roughly EUR 600 million, and the refinancing of the next year's bond maturity has already been secured through a bridge facility. The net debt decreased to a bit over EUR 300 million, while our leverage then improved to 4.6x as earnings recovered. We are still above our long-term leverage target, which is 2.5x, but we are clearly moving in the right direction, but a lot of work ahead of us.
Our investment grade rating from Moody's has remained unchanged, and we also discontinued our S&P credit rating during the quarter. That's all from me at this point in time. Back to you, Esa.
Thank you, Anssi. Some words about Husum, because that's obviously our focus also going forward. Let me be clear here. Husum is still loss-making, and the current performance is not where it needs to be. Low utilization remains still the key challenge. However, performance is improving. Namely, our transformation program measures together with the lower wood costs are supporting the profitability currently. Additional sheeting capacity that we established earlier this year in Winschoten, Netherlands is supporting higher utilization of Husum's folding boxboard capacity in Europe, while our commercial actions are supporting improved pricing and product mix as well. The further improvement potential remains significant, as you can see from this slide on the right side. The higher production and delivery volumes, further transformation program benefits and operational efficiencies, as well as improved paperboard market balance and pricing, this all can support further improvement in profitability of Husum.
Our near-term outlook. Looking at the next three to six months, the overall operating environment. The improved paperboard market balance should continue to support the pricing environment. Cost pressures are still there, partly reflecting continued geopolitical tensions, as we all know. Despite the recent movements in the U.S. dollar and SEK, our hedges are expected to keep the currency impact limited over the next three to six months. Turning more specifically to Metsä Board, cashflow-based steering remains our key priority. Although Q4 operating cash flow is expected to be lower than in Q3, as Anssi was explaining already earlier. Paperboard volumes are expected to decrease seasonally, while earlier price increases should support the profitability. The tariff refunds recorded in Q3 will not recur in Q4. Maintenance costs, on the other hand, are expected to be lower despite the extended annual maintenance shutdown at Kemi.
Finally, Metsä Fibre's result is expected to improve from Q3. Looking beyond the near term, let me briefly come back to our strategy and the priorities. You see some of the key numbers that we are following this also in the future. Our priorities remain clear: safety, organizational renewal, customer-driven growth, and above all, restoring profitability and operational efficiency. As the numbers show, we still have a lot of work ahead of us, and our focus is firmly on executing the strategy. On the commercial side, we are now working more closely with the brand owners who need to ensure regulatory compliance while responding to consumer demand for more sustainable packaging. Together with our partners, we provide packaging solutions that are material efficient, sustainable, and compliant with the evolving regulation as well.
Our design studio in Milan and also in Finland and U.S., and expanded sheeting capacity in Winschoten strengthen our service offering and bring us closer to brand owners and their packaging needs. The recognition received by the Sephora packaging concept is a good example of what this collaboration can deliver. Together, these developments strengthen our commercial position and support our ambition to grow in European premium consumer packaging. To sum up, we are moving in the right direction. Profitability and cash flow are improving, and the paperboard market balance has become more supportive. At the same time, Husum and the weak market pulp environment continue to weigh our performance. Our priorities are clear: improve Husum's profitability, maintain strict financial discipline, and capture the commercial opportunities ahead. We will also continue the disciplined execution of our transformation program and Lead the Pack strategy.
There is still significant work ahead, but we are confident in our ability to deliver further improvement and build a stronger foundation for sustainable profitability, as we have shown in our earlier quarters as well. That's the picture from us now. Thanks for listening, and with that, we are very happy to take your questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Linus Larsson from SEB. Please go ahead.
Thank you very much, and a very good day to everyone. May I please start off with the folding boxboard market, and there was the statement in the report about an improved market balance? It sounds like you are also referring to folding boxboard in that context. So could you maybe put a bit more light to that and how you see prospects for your upcoming price negotiations for the European customers in 2027, please?
Thank you, Linus, for your question. First of all, the market balance, generally speaking, I would say that year on year, we roughly look at the capacity adjustments with 1 million tons, if you take the SBS and FBB market, half of that roughly in the U.S. and the rest in Europe. So that's practically or the ballpark number. So I think it's rather significant if you look at the folding carton market, generally speaking. Then if you add the WLC market, it's even higher, and that market is also our addressable market. So in that sense, I would say that the situation, we can say that it has improved.
That, of course, what we have been saying as well, that our annual volumes that we are committing and have a framework agreement with the customers on the prices and volumes is amounting roughly to 40% of our FBB volumes. I think that this situation gives together, of course, we see that there is a high cost pressure as well to the market players, and thus we see that we are heading to annual negotiations in much better position than we were a year ago. So that's the situation currently. What comes out of the negotiations, I cannot give any kind of forecast currently or projections at this point of time, but they will continue now for a while, and you will be certainly hearing more news in the next quarterly report or annual report that we will be publishing.
Yeah. I noticed that on a sequential basis, you actually have declining variable costs, that is opposed to some of your Nordic peers. I am certain, compared to many of your continental European peers, who most probably see rising variable costs in this market environment. Are you sensing any change? One might suggest that there is a market share shift to the north in this kind of fossil energy cost increase that we are now seeing. Is that how you see it already at this stage?
Yeah. Linus, very good and topical question. We see clearly that the Nordic players are in a better positions, and so are we in relation to our, let us say, variable costs and especially the energy, as we are 90% self-sufficient and also fossil-free, more than 90% fossil-free. So we are in a better position, of course, there. This is actually now, while we have seen these shifts in the market and some difficulties even among the players and difficulties to supply, so clearly those discussions that I have had with the customers is that the reliability is number one currently for the brand owners. They will not be jeopardizing the reliability of the supplies, and this is giving a good grounds for the discussions going forward.
Whether then it plays out to be better for the Nordic players, difficult to say at this point of time, but I feel that we are in a better position than a year ago.
Interesting. Then maybe finally, you are saying that there is an improving market balance, yet your own operating rates in paperboard remains low. Obviously you took a bit of downtime in the third quarter. Given how low your operating rates or shipments to capacity rates are in the group as a whole, I presume that they are very low in the Husum operations. I am just a bit curious, and you have taken measures, you mentioned a couple. To bridge this gap, what is there left to be done that you can do with own measures? Are there more acquisitions like Winschoten or can you even more aggressively cut costs? It is a pretty big gap to fill.
Yeah. Well, I think that we have been explaining this earlier as well, and our situation, we have a really strong order book or strong order books in the Finnish mills and the mill that is suffering from the low capacity utilization is Husum. But currently we are in a situation that we are not in a hurry, so we are more for the healthy business and seeing that what are the capabilities for Husum to produce or deliver the best potential results for the group as well. So we are taking that step by step. And of course, all the measures that we have in the transformation program is actually aiming to also improve the situation in Husum.
And our commercial excellence side, Husum is one of those core things that are always in the center of the things when we are thinking that where we are producing our products. But generally speaking, saying this is that this new capacity, it's not very easy to bring into the market because of the fact that I have been explaining earlier, because all of these mills are already part of some packaging infrastructure, either in U.S. or in Europe. And this is making it very difficult and actually slow to bring these new capacities into the market and have all of these, let's say, qualifications before they can then penetrate to these end users. And we are looking the end users, but we have said that our focus segments are the food and pharma currently, both in Europe and in U.S.
I think that we have time, we are patient, we are building the momentum because this mill, the Husum BM1 is the biggest FBB, let's say, machine in the market and also one of the most competitive ones. So we are building the momentum, and we are patient on this one. At the same time, when you were asking regarding this, you were asking the other measures, like the structural things and other actions in order to improve the situation in Husum. We have said that we are open for also inorganic growth in respect of the FBB and consumer packaging, and this is exactly what it means also can be one part of the solution, as you were pointing out, rightly so.
Great. Many thanks.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Joni Sandvall from Nordea. Please go ahead.
Yeah, thanks. Maybe a little bit follow-up on the Husum situation. Thinking about the U.S. export opportunities currently, we have seen the SBS prices continuing to increase in U.S. Does this actually open any new export opportunities from Husum to you?
Thanks, Joni. I would say bluntly, yes, absolutely. We see also operating rates actually last quarter for the SBS mills being in 84% for SBS mills in the U.S., if I recall it correctly. Roughly right. I'm seeing that nodding in the room. So 84% roughly, and thus it is supporting also with the costs involved, have been both costs and then this higher operating rates, they have been supportive on the pricing. We have seen that the indices have been moving upwards regarding the prices, and we have been also following this trend with our customers. Remembering that we have a yield advantage also between 10%-30% in comparison to SBS in the market.
With the currency moving to the right direction, and then these movements in SBS markets, and then one mill in the U.S. side on FBB, or in the Canada also closing down at least on temporary basis. Two other mills curtailed on temporary basis or then indefinitely. All of these are supporting our situation in the U.S. As I've said also earlier, that we have already growing customers there. We have been losing market share in the food service board, which is generally also in a difficult position and in a really competitive environment if I'm seeing our customers there. The food service market is not maybe the best addressable market currently in the U.S., and thus we are concentrating on the food and pharma and other branded business in the U.S., and we have already growing customers there.
Okay. That is very clear. Maybe then a question on the emission rights sold in Q3. Those were higher than in Q1 and Q2. Is there any reason for this, why it was higher?
Yeah. Well, thanks for the question. We have, of course, sold quite evenly our emission rights, and now the price levels were in a feasible level for us, so we decided to sell 5 million more compared to Q2 in the situation where the earnings have been. But I think it is somewhat if we look at the history, how much we have sold ETS, it is not a, in a way, one-off. So there have been, in a way, sales of ETS already in the past, and they typically have been higher, especially if we look at 2024, 2023.
Okay. That is clear. Then maybe a little bit related question on the energy refunds in Q4. Any indication on how this will play out in Q4? I think last year, was it roughly EUR 10 million what you received?
Yeah, I think we are expecting approximately the same level of the refunds this year, so no deviation should come from that. Of course, the schemes are changing.
Okay.
As we know, this is something we are keeping a close eye on.
Yeah. Last question from the depreciation side, Q3 was coming down now. Is this a good run rate proxy going forward?
This is a good proxy for the remainder of the year and going forward as well.
Okay, thanks. That is all from me.
Thank you, Joni.
There are no more questions at this time on the phone lines.
Okay. Two questions in the chat, and maybe to start with you, Anssi, this is regarding the tariff refunds.
Are you able to clarify more on how the EUR 10 million tariff refund has been derived? For example, has it been sized for the amount of paid tariffs, for example, during 2026-
or what is the math behind that?
Yeah. Thanks for the good question. It is, of course, something we are not disclosing in detail, but the net impact of the tariff refund is EUR 10 million, as mentioned. It is based on 2025 and 2026 paid tariffs when these IEEPA tariffs were basically deemed illegal by the Supreme Court in the U.S., 24th of February this year. So that is when the process took place, and then, of course, we applied and this is the net impact we then got. And of course, there is some commercial arrangements also behind the topic, but not going to go into the details, of course, for obvious reasons.
Good, and then the market related. How do you see the Asian competition to have developed lately in FBB markets you are present? Any changes that would impact the current pricing environment?
Well, if I take this one, from my part, I can answer that in this year, the growth rate has been somewhere around at 21%, roughly, and it accounts to now currently in the level of 8% of the deliveries, 15,000 on a monthly basis, roughly. We are not in this market. I think it is more speculative market. We are more on the premium side and remembering that we are also delivering our own board material to China. So we are in a different category. There are also Chinese buyers that are buying from us because of the quality reasons, but we are not in the same market.
Fair enough. Okay. We do not have any more questions in here, so we will end the call here. Thank you all for your time today and for the good questions. Our next earnings call will be on February 4th for our full year results. Until then, all the best for the rest of the year. Thank you and goodbye.
Thank you very much.
Thank you.