UPM's CEO Says First Quarter Results in Line with Expectations

Jussi Pesonen

April 25, 2013 - UPM's President and CEO Jussi Pesonen said that the performance of the company's growth business segments was steady in the first quarter of 2013, but its paper business remained challenging.

"The first quarter was well in line with our expectations: steady and positive in our growth businesses, hard work and continuing challenges in Paper. Our operating profit excluding special items, at EUR 144 million, materialised close to the comparison periods (156 million in Q1 2012, 146 million in Q4 2012). The operating cash flow was EUR 103 million, which was impacted by a seasonal increase in working capital.

"The financial result was clearly underpinned by the continued good performance of Pulp, Energy, and Label. Our Pulp was back to normal performance and Energy hedging continued to be successful.

"The performance of Plywood and Timber also improved thanks to improved cost efficiency and revised commercial strategies.

"In Paper, however, the market developments were as challenging as we anticipated. The profitability of European paper business was negatively impacted by three factors: publication paper prices, adverse currency development and delivery volumes compared to the latter half of 2012. Measures taken in 2012 resulted in EUR 30 million lower fixed costs in the first quarter of 2013 compared to last year.

"The market realities are currently tough and these savings were not sufficient to offset the market impact in Paper. Therefore, we will go ahead with the restructuring and streamlining plans that we announced in January to achieve EUR 90 million annual fixed cost savings. We are permanently closing two magazine paper machines in April, one in Rauma, Finland, and one in Ettringen, Germany. The sale of the Docelles paper mill, the Pestovo sawmill and the Aigrefeuille further processing mill is also ongoing, as is the streamlining of our functions.

"Economic pressure has led — and we believe will continue to lead — to structural changes that will be important for the whole industry," said Pesonen.

Outlook for 2013 unchanged

"Economic growth in Europe is expected to remain very low in the early part of 2013. This is having a negative impact on the European graphic paper markets in particular. The hydrological situation in the Nordic countries has normalised and the forward electricity prices for 2013 are on about the same level as the realised market prices in 2012. Growth market economies are expected to fare better, which is supportive for the global pulp and label materials markets as well as paper markets in Asia and wood products markets outside Europe.

"In H1 2013, UPM’s performance will be underpinned by continued stable overall outlook for growth businesses such as Energy, Pulp and Label, as compared to H2 2012. However, slightly lower publication paper prices, adverse currency development and lower delivery volumes are having a clear negative impact on the European paper business profitability, as compared with H2 2012. UPM’s cost level is expected to be stable."