S&P revises Metsa Board outlook to negative amid weakening metrics

Investing.com -- S&P Global Ratings has revised its outlook on Metsa Board Corp. to negative from stable, while affirming the company’s ’BBB-/A-3’ ratings.

The rating agency now expects Metsa Board’s adjusted debt to EBITDA to peak at about 4.5x-5.0x in 2025, up from 2.1x in 2024. This is significantly higher than S&P’s previous expectation of an improvement toward 1.4x.

S&P forecasts that Metsa Board’s adjusted EBITDA in 2025 will drop to €65 million-€75 million, down from €163 million in 2024 and well below the previous forecast of €212 million.

The deterioration reflects prolonged weak demand for paperboard in Europe and excess supply, partly due to recent capacity additions in Europe and increased competition from Asian imports. Demand was particularly low in the first half of 2025, especially in the U.S. market, which accounted for about 25% of Metsa Board’s sales in 2024.

Following the drop in pulp prices in the second quarter of 2025, S&P anticipates ongoing weak demand and prices for pulp for the remainder of the year, with leverage expected to peak at about 4.7x by year-end.

Despite lower EBITDA expectations, S&P’s free operating cash flow (FOCF) forecast for 2025 remains broadly unchanged at about €40 million, supported by a €70 million working capital-related cash inflow and reduced capital expenditure of about €100 million.

S&P expects a significant EBITDA recovery to about €200 million in 2026, driven by cost reduction initiatives expected to deliver a €100 million EBITDA improvement. An additional €30 million EBITDA uplift is anticipated from 2026 onward following the closure of the board mill in Tako, Finland in June 2025.

The rating agency notes that there is minimal headroom under its ’bbb-’ assessment of parent company Metsa Group’s creditworthiness. S&P continues to assess Metsa Board as a highly strategic subsidiary of Metsa Group.

S&P could lower its rating on Metsa Board if the company’s adjusted debt to EBITDA fails to recover to below 2.0x, or if it revises down its assessment of Metsa Group’s creditworthiness.

The outlook could return to stable if Metsa Board successfully delivers on its cost reduction program, with adjusted debt to EBITDA improving to below 2x on a sustained basis, and if Metsa Group’s financial performance also strengthens.

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