Review by the President and CEO

28 July 2022

The operating environment in the first half of the year was characterised by several exceptionally severe threats and risks. The coronavirus pandemic has proved to be a protracted phenomenon worldwide, and we must now adapt to it and learn to live with it. In China, one of Metsä Group’s main markets, extensive lockdowns aimed at containing the pandemic were seen in the first half of the year, which had direct and indirect impacts on our business operations. Russia’s brutal and unlawful attack on Ukraine led to extensive measures in Metsä Group. Among other things, we discontinued our operations in Russia and rearranged wood use and procurement, following the end of wood procurement from Russia. The steep increase in energy prices, affecting our tissue paper business in Central Europe, also called for adjustment measures. Amid these upheavals, demand remained strong in our main product groups and market areas. We managed to counter the impacts of cost inflation entirely or partly through our pricing. Overall, the result for the first half of the year was very strong. In terms of operating profit, the second quarter was the best in Metsä Group’s history.

Metsä Group is carrying out investment projects that are affected by both the pandemic and Russia’s actions through either cost inflation or the availability of materials and components. The test run of Metsä Fibre’s next-generation sawmill in Rauma began as planned in May, and continuous production will begin in the third quarter. The start-up of the recovery boiler and turbine at Metsä Board’s Husum mill has been postponed from the planned second quarter to the fourth quarter. This is mainly due to the delay in installation work caused by resource shortage. The pandemic has also affected this. Metsä Fibre’s bioproduct mill in Kemi is progressing according to schedule towards the launch of production a year from now. Cost inflation has increased the project’s original cost estimate by 15–20%. Metsä Tissue is preparing an investment to renew the Mariestad mill, while Metsä Wood is planning to expand LVL production in Äänekoski. Metsä Board increases its folding boxboard capacity at the Husum integrated mill and  in May, Metsä Board announced that it is  exploring opportunities for a further folding boxboard capacity incrsease investment either in Finland or Sweden.

People need products made of wood in their daily lives. Products and the industry must evolve to meet the challenges caused by the climate crisis and the general resource scarcity. The products used in daily life must be produced with an ever-smaller amount of resources, including energy and fibres. This is our guiding principle when developing operations, whether related to mill investments, the efficiency of logistics chains or the contents of products. Efficient resource use is a key foundation of the circular economy.

The commercial use of forests has come under pressure to change from EU legislation, national policies and the media. It is obvious that forest use needs to be reformed. Work aimed at adapting forest management to better safeguard biodiversity will not begin today; it began years, or even decades, ago with the establishment of forest certification systems. Its positive trends can be seen in the results of the national forest inventories, which have been carried out in Finland for a century. We have learned to examine forests as a larger system and have come to understand the significance of forest land for carbon storage. This has contributed to changes in operating models, especially concerning peatlands. It is necessary to identify forest environments of high protection value and bring them under the scope of protection. This isdone through public and voluntary measures. A well-managed healthy forest grows and binds carbon.

Forests and their multiple meanings are important to Finland and the Finnish identity. Metsä Group works daily to support the three pillars of sustainability: ecological, social and economic sustainability must be achieved so that they work in unison.

Ilkka Hämälä
President and CEO
Metsä Group