Good afternoon, ladies and gentlemen, and welcome to this presentation of Metsä Board's half-year and second quarter results 2018. My name is Mika Joukio, and I'm the CEO of Metsä Board. Together here with me, I have our CFO, Jussi Noponen, and Head of Investor Relations, Katri Sundström. So, let's start by looking at the second quarter in brief. Our total paperboard delivery volumes rose compared to the first quarter and were 489,000 tons. Quarterly, this was an all-time high. Also, price levels developed nicely. In folding boxboard, prices remained stable compared to the first quarter, whereas kraftliner prices continued to rise slightly. In folding boxboard, we reached roughly half of the price increase, EUR 90 per ton, which we announced in Europe at the end of last year. In white kraftliners, our latest price increase announcement, EUR 50 per ton, has been realized almost fully.
The bulk market continued to be strong, and market prices kept rising in Europe. As always, the second quarter included several planned maintenance shutdowns. Actually, all the other mills in Finland, except the Kemi Integrate, had shutdowns. In addition, Metsä Fibre's two mills, Äänekoski and Joutseno, had their maintenance breaks too. And naturally, all this had a negative impact on our profitability. The difference in the first quarter, which is the only maintenance-free quarter compared to all other quarters, is approximately EUR 10 million. This derives from actual maintenance work, but also the lost production during the shutdown. And this calculation includes Metsä Fibre's share. Wood costs continued to rise. In particular, the cost of wood imported from Baltic countries to Sweden continued to increase in the second quarter. In the U.S., the shortage in truck transport capacity has pushed up the freight costs, which also impaired the profitability.
Our total paperboard deliveries were at a record high level in the second quarter, roughly 490,000 tons. The growth rate compared to the first quarter was 4%. Among all European producers, the growth rate was 1%. During the first half of 2018, our total deliveries grew by 6% compared to the first half of 2017. Among all European producers, the growth rate was 4%. Discussions around the sustainable and pure packaging materials continue to drive the demand for fresh fiber paperboards, especially for folding boxboard. Increasing demand in point-of-sale solutions in retail and growing e-commerce keeps the demand for high-quality kraft liners on a high level. Then the sales and operating result. Higher delivery volumes, together with rising price levels, increased our quarterly sales to over EUR 500 million.
In fact, this was the highest level during the time Metsä Board has been a pure-play paperboard company since the beginning of 2017. Our operating profit in the second quarter was weaker, as expected, compared to the first quarter. The main negatives were several planned maintenance breaks in Finnish mills and higher costs caused by tightened wood supply and increased freight costs in the U.S. Profitability was upheld by higher delivery volumes and increased prices in paperboards, as well as the strong bulk market. In Husum mill in Sweden, we still continue the efforts to increase the average price in folding boxboard by improving the sales mix. The bulk market remained strong, and prices kept rising in Europe.
The dollar price of softwood pulp rose by 10% in the second quarter compared to the first quarter and 32% in the first half of 2018 compared to the first half of last year. In China, the corresponding price movements were flat and 40%, respectively. Metsä Board's annual pulp balance, including the share from Metsä Fibre, is over 500,000 tons long. The majority of that long position is softwood pulp and is sold mostly in Europe and in China. Market drivers for pulp are, among other things, limited new capacity, especially in softwood pulp in coming years, and increased demand from China. Then a look at the costs. After several years with stable wood prices, we have seen them rising this year. The trigger was a very wet autumn and early winter, which caused harvesting problems and shortages in wood supply.
Metsä Board's production costs rose in the second quarter, mainly due to the cost of wood imported from Baltics to Sweden. We estimate that the negative result impact from rising wood costs in 2018 compared to 2017 will be EUR 30 million. So we have updated our previous estimate due to the higher-than-expected share of imported wood to Sweden. Impacts from foreign exchange rates in the second quarter compared to the first quarter were flat. This includes the hedging activities. During the first half of 2018, the negative impact was EUR 28 million compared to the corresponding period last year. During 2018, the US dollar has somewhat strengthened against the euro, whereas the Swedish krona has weakened. However, the positive impacts from these will be evident in our result only at the end of the year.
In fact, the third quarter result will take the biggest hit, deriving from foreign exchange rate changes, including the hedges, compared to other quarters in 2018. The comparable return on capital employed in the second quarter was 13.9%, which is above our long-term annual target level of 12%. The 12-month rolling return was 13.8%. Our capital employed at the end of review period was EUR 1.7 billion. The 12-month rolling cash flow from operations was EUR 240 million. Second quarter did not include any major changes in the working capital, which would have impacted the cash flow. Our financial position is strong, and leverage is at 1.2. Our interest-bearing net debt at the end of June was EUR 388 million. In April, we made an early payment of EUR 100 million of our existing long-term loan and at the same time increased our unraised credit facilities.
Our net debt slightly increased due to the dividend payments of EUR 75 million. We also continued our success regarding external recognitions in sustainability and social responsibility. In June, we were awarded the gold-level rating by EcoVadis for the second consecutive year. Overall, we were ranked in the top 1% of suppliers assessed by EcoVadis across all categories. This is a significant achievement as the EcoVadis assessment is becoming an increasingly important guide for our customers when judging their supplier sustainability and corporate social responsibility performance. Then to the near-term outlook. We believe that the good momentum in the paperboard market will continue. A big part of the price increase announcements have gone through, and we expect the prices to remain at least stable. We expect that Metsä Board's paperboard delivery volumes will be flat in the third quarter compared to the second.
During the third quarter, we will have planned shutdowns in Kemi Integrate and partly also in Husum Integrate. Foreign exchange will have some additional headwind in the third quarter compared to the second quarter. The negative impact from the foreign exchange rate changes will be the biggest in the third quarter compared to the other quarters in 2018. Our total production costs in 2018 will increase from the previous year. The main contributor is wood cost, which will be EUR 30 million higher compared to 2017. At the moment, we don't expect the delta between Q2 and Q3 in wood costs to be that big. And most importantly, we don't expect any production curtailments due to the shortage of wood availability. And then our result guidance.
We expect that our operating result in the third quarter of 2018 will remain roughly at the same level as in the second quarter of 2018. Then, to summarize, all-time high paperboard delivery volumes together with rising price levels increased our sales in the second quarter. The bulk market continued to be strong, and price levels accelerated in Europe. Metsä Board has also suffered from rising wood costs in 2018. Exceptional weather conditions have caused shortages in wood availability and impacted on pricing. The big picture looks favorable for us. Demand for ecological paperboards is growing, and price levels in folding boxboard and white kraft liners are expected to stay stable or even rise. Before finishing, I want to inform you of our upcoming Capital Market Day 2018. This time, we will hold it in London at Haberdashers' Hall on 14 November.
Public invitation is out, and registration has started. You will find more information about the event on our Investor webpage. Ladies and gentlemen, this was the presentation of Metsä Board's half-year 2018 and second quarter results, and we are now happy to answer any questions you may have.
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will take our first question from Antti Koskivuori with Danske Bank.
Thank you. I would have a few clarifying questions on kind of the near-term outlook.
Firstly, on the effect that you now see to be somewhat of a headwind in Q3, could you provide us a number of how big of an impact this should be in Q3 versus Q2, and also, it would be very helpful to hear your comments about the similar kind of Q4. What do you see there? That would be my first question, and secondly, about the wood supply issues that we currently have, I guess, and you say that you don't see any kind of impact for the H2 at the moment. I was just wondering that do you see risks that the situation could turn worse, and especially, of course, the Swedish forest fires come to my mind. If that's any kind of risk to your outlook for H2, yeah, those would be my questions. Thank you.
Okay.
If I take your second question first, and then you see if nobody will take the first one. So as far as the wood supply is concerned, we are not concerned about the wood availability, as I already mentioned. If there will be bigger problems in Sweden, then we take more supply, more wood from Baltic countries or from Finland. And that, of course, will have a slight negative impact on costs, no doubt. But at the moment, we don't see that very big risk. So the wood costs, we estimate that the wood costs are more or less at the same level in Q3 as they were in Q2. Yeah. Okay. Then you see nobody will take this Forex question. Yes. So the net headwind, including all currencies in the third quarter, is estimated to be low single-digit millions versus the second quarter.
That consists of a bigger headwind from the U.S. dollar, which is partly offset by the weaker krona. In the fourth quarter, after hedging, effects will be more favorable compared to the third quarter, but we are not yet giving any specific guidance on that.
Yeah. Okay. Still one question, if I may, about the Husum and the sales mix kind of the outlook for that. Can you give us kind of insight about the €100 million improvement? Where were you actually on the run rate at the end of Q2? If I understand correctly, you state that the sales mix is kind of the only thing that's keeping you away from the €100 million at this point.
Yeah. So at this point, I don't give any specific number. Our intention is to open up this Husum case more in the capital market days in November.
But what I can say here is that, as we all remember, there are practically three elements behind this profit improvement. First of all, higher bulk production, and then secondly, the fixed costs improvement, and then thirdly, and the biggest part, higher sales, higher production, and then higher prices. So as far as the bulk production is concerned, we are practically there, so that's okay. Then the fixed costs, we have been able to cut as we targeted and as we have told earlier. And then as far as the third element is concerned, the production is pretty close to the target level already. We don't report separately anymore the so-called operating rate, but I can say that it's at a good level.
And as far as the prices are concerned, so month after month, the price levels are increasing and remains to be seen then where we are at the end of the year or beginning of next year. But as I said, we will open up the case a little bit more in London in November.
All right. Thank you very much.
Thank you. We take our next question from Linus Larsson with SEB.
Yes. Good day, everyone, and thanks for taking my questions. Firstly, on paperboard shipments growth, where the pace came down a bit in the second quarter compared to the previous quarters, do you have a target for the full year in terms of paperboard volume growth?
So I don't fully understand what you say that the pace. I mean, during this year, we have delivered 6% more than last year in the corresponding time period, and that is clearly over the market growth. And our target, which has been publicly also stated, is to grow over the market growth. So also this year, target is to grow more than this 3% or 4%. So that's the clear target. And so far, we have been able to grow by 6%. And Q2 was all-time high, so I think.
Yeah, yeah. No, no. But the pace of growth year on year was much slower in the second quarter compared to previous quarters. That's why I ask. And in the previous couple of years, you've had double-digit growth.
So my question is also, in the second half of 2018, will we see the pace of year-on-year growth pick up in paperboard volumes?
At the moment, the best estimation is that the pace will be pretty much as now in the first half of this year.
Okay. Thank you. And I guess to some extent related to that question and just coming back to something that we have discussed on the previous earnings calls as well, when it comes to further potential de-bottleneckings and investments in paperboard production, is there anything to add to that today? And if not, when do you think you might come back to the market with some information regarding that?
I have said that I said that already in May, and I can comment here also that, of course, we are planning different options, whether they are de-bottlenecking or bigger ones.
And then we will tell when we are ready, but I don't want to give myself any clear deadline, whether it's by end of this year or whether it's something else. But I can guarantee that we are calculating different options after summer holidays already.
Okay. Okay. Thank you.
Thank you. Ladies and gentlemen, as a reminder, please press star one on your telephone to ask a question. Thank you. And we take our next question from Harri Taittonen with Nordea.
Yes. Good afternoon. Just one sort of difference in the maintenance schedule this year compared to last, which is the Husum that you're starting the maintenance already during the third quarter.
And just wondering how that might. Do you have sort of a feel because it's kind of quite a big stoppage, and if I remember right, the impact was close to EUR 10 million or so in the fourth quarter last year. So is there any indication how that is sort of seen to be split between the third quarter and the fourth quarter this year?
So the length of the shutdown is more or less the same as last year, but only difference is that it's practically one week earlier. So we will start already during or at the end of September and then continue in October. And as we have said earlier also, is that when we take or think the first quarter, so first quarter was maintenance-free, and for that reason, practically, it's EUR 10 million better result in that quarter than in Q2, Q3, or Q4.
So there is nothing special as such here. And the impact from maintenance shutdowns in Q3 will be more or less the same as in Q2.
Good. Okay. Another question is about the linerboard market and the white top business there because there are some price increase announcements, or at least, well, SCA in public sort of mentioned to be kind of raising prices for linerboard. And you refer to some potential increase. But have you been out, or do you sort of have communicated plans to move with price increases for linerboard in any grades there?
In linerboard, we have utilized pretty well the tight market situation, and during the last 12 months, we have had, if I remember right, at least three price increases. I don't speculate with the coming price increases, but I can only say to you that we are awake.
So we follow market very carefully and then act accordingly. But I don't give any promise at this point.
Well, thank you. Thanks.
Thank you. We take our next question from Robin Santavirta with Carnegie.
Good afternoon. Thank you. Now, in terms of Metsä Fibre, I guess they had two plants under maintenance now in Q2. Can you remind us about the maintenance sort of outlook for Q3 and for Q4? I'm talking about Metsä Fibre here.
So in Q3, they will have together with us the Kemi shutdown. And then, if I remember right, then fourth quarter will be Rauma.
Sure. Thanks. And then in terms of the paperboard business, so if you exclude, I mean, Metsä Fibre obviously reports very strong earnings again despite of maintenance. But if you exclude that from your numbers, actually, you're down 1 million in terms of comparable EBIT.
That's sort of mostly the paperboard business. And this, despite Husum, should be much more profitable at the moment year on year. So is this only a higher input cost, or is there something else that is impacting profitability of your paperboard business?
Yeah, of course. Of course, the impact from bulk prices will be, as you described, but then we need to remember the currencies. So this year, we will have a clear headwind comparing last year, and that will, of course, affect on paperboard business. We have partly been able to cover that by having these price increases, but not fully.
Exactly. Exactly.
In terms of the markets, I know you don't like to comment exactly on price increases and what you see out there, but in terms of just market dynamics, both folding boxboard particularly, and then the bulk market in Europe, what are you seeing? Are the markets still as tight as they have been, or what kind of market dynamics are you seeing at the moment in Europe?
During summer months, we have not seen any kind of change. All the inflows are good. Mills are running full, both in Husum as well as in Finland. Market situation is good, and demand is good. As far as the bulk market is concerned, also same story.
All right. Good. Thank you.
Thank you. As a reminder, please press star one to ask a question.
We take our next question from Mikael Jåfs with Kepler Cheuvreux.
Yes. Hello. Good afternoon, everybody. In your report there, you talk about American transportation costs going up. Can you please give us some color and flavor on that, please?
Yeah. Of course. There has been new legislation also in the U.S., which limits then the time, how long the drivers can be able to drive, etc., etc. So the freight costs have increased there. And for us, it's what would I say? Let's say 2-3 million euros, roughly, the impact.
Okay. Perfect. Thank you.
Thank you. And it appears we have no further questions, so I would like to hand the call back over to you for any additional or closing remarks.
Okay. Thank you, everybody, for your participation, and looking forward to see you in London in November. Thank you. Have a nice evening.