PaperAge Magazine

UPM Finishes 2017 with Strong Fourth Quarter and Record Earnings for the Year

Jussi Pesonen "We finished the year with an excellent fourth quarter. We were able to increase prices and achieve good growth in delivery volumes, which in this quarter outstripped the impact of higher input costs and unfavourable currencies." – Jussi Pesonen, President and CEO, UPM.

Jan. 31, 2018 – UPM's president and CEO, Jussi Pesonen, said his company had record earnings in 2017 and finished the year with improved pricing for its products and higher delivery volumes.

“2017 was a record year and its last quarter was our 19th consecutive quarter of earnings growth. This was the result of favourable market conditions, timely growth investments and successful mitigation of input cost increases. Once again, our business model, performance culture and capex effectiveness delivered excellent results.

“Our comparable EBIT in 2017 grew by 13%. Our cash flow was consistently strong, and we reduced our net debt by EUR 957 million over the course of the year, ending at a record low of EUR 174 million.

“We finished the year with an excellent fourth quarter. We were able to increase prices and achieve good growth in delivery volumes, which in this quarter outstripped the impact of higher input costs and unfavourable currencies. Our comparable EBIT in Q4 increased by 29% to EUR 366 million.

“UPM Biorefining benefitted from higher pulp prices and good delivery growth during the quarter. Kaukas, Pietarsaari and Fray Bentos pulp mills and the Lappeenranta biorefinery all set records for annual production. UPM Raflatac, UPM Specialty Papers and UPM Plywood were able to offset higher input costs by increasing deliveries and sales prices. At UPM Energy, the hydropower generation recovered to above normal level. UPM Paper ENA also reported a strong end to the year, despite rising fibre costs.

“Since the introduction of UPM business model in 2013, we have achieved a clear improvement in business performance, attractive returns for our growth investments and a truly industry-leading balance sheet. Today we are proud to have six strong business areas, which provide us with a wealth of future opportunities.

“Going forward we will maintain our performance focus supported by continuous improvement culture and innovation. We will also continue to grow our businesses with attractive focused growth investments. Today we announced the latest news on UPM Specialty Papers' growth plans.

“Furthermore, we are now well-positioned for transformative prospects. I am pleased that we have reached a cornerstone agreement with the Government of Uruguay, outlining the local prerequisites for a potential pulp mill investment. The infrastructure projects and the pre-engineering of the mill are in progress. For UPM's pulp business, the potential mill would imply a step change in business size and earnings.

“Another opportunity for transformation comes with the emerging biomolecules businesses, biofuels and biochemicals. During the fourth quarter, we started a basic engineering study regarding a potential industrial scale biochemical refinery in Germany. Entering the biochemicals business could provide UPM with significant growth platform for decades to come.

“Our objective is earnings growth and therefore, we will maintain our high standards when it comes to return requirements for growth investments.

UPM is in better standing than ever: in the coming years we can allocate more capital to growing and transforming the company while simultaneously increasing the distribution to our shareholders and maintaining headroom in our strong balance sheet. Today, UPM's Board of Directors has proposed a dividend of EUR 1.15 (0.95) per share for 2017, representing 39% of operating cash flow per share and up by 21% from last year.

“All in all, UPM is well-positioned for 2018 and beyond. UPM businesses today and in the future provide sustainable and safe solutions for the growing global consumer demand. Bioeconomy offers us limitless opportunities for value creation and growth."

Outlook for 2018

“UPM reached record earnings in 2017. Fundamentals for UPM businesses in 2018 continue to be favourable.

“Healthy demand growth is expected to continue for most of UPM's businesses in 2018, while modest demand decline is expected to continue for UPM Paper ENA. Sales prices are expected to increase in most of UPM's businesses, compared with 2017.

“Input costs are expected to continue increasing in 2018, compared with 2017. UPM will continue measures to reduce fixed and variable costs to mitigate this. 2018 starts with less favourable currencies than 2017.

“Q1 2018 results are expected to be impacted by temporary wood harvesting limitations in Northern Europe caused by unusually warm and wet weather in late 2017 and the beginning of 2018.”

UPM leads the forest-based bioindustry into a sustainable, innovation-driven and exciting future across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Paper ENA and UPM Plywood. To learn more, please visit: www.upm.com

SOURCE: UPM