PaperAge Magazine

UPM CEO Reports Strong Second Quarter Results on Product Demand and Improved Pricing

Jussi Pesonen "UPM delivered yet another successful quarter of earnings growth. Customer demand for our products continued to be strong and we succeeded in increasing prices in most of our businesses also during the quarter." – Jussi Pesonen, President and CEO, UPM.

July 24, 2018 - UPM's President and CEO, Jussi Pesonen, reported strong demand and improved pricing for UPM's products played key roles in driving earnings during the second quarter of 2018.

Mr. Pesonen's Q2 2018 comments follow:

“UPM delivered yet another successful quarter of earnings growth. Customer demand for our products continued to be strong and we succeeded in increasing prices in most of our businesses also during the quarter. This enabled us to expand our margins and recover the impact of clearly higher input costs.

“We carried out several significant scheduled maintenance shutdowns during the quarter, which held back our operating profit by approximately EUR 90 million. However, earlier challenges in wood harvesting and logistics were solved and no longer impacted our performance.

“Our sales grew by 5% and our comparable EBIT increased by 24% to EUR 334 million. Operating cash flow was strong at EUR 329 million. UPM paid a dividend of EUR 613 million and net debt was EUR 401 million at the end of the quarter.

“UPM Biorefining increased its earnings clearly. Customer demand was strong for pulp, biofuels and sawn timber, and sales prices increased. Scheduled maintenance shutdowns were carried out at the Fray Bentos and Kaukas pulp mills and at the Lappeenranta biorefinery. During the Kaukas shutdown, the pulp mill expansion was completed, providing 30,000 tons of additional pulp capacity.

“UPM Communication Papers grew both its sales and earnings in tight markets. The business area achieved high operational efficiency and increased prices. UPM Raflatac performed well and managed to resume earnings growth after a challenging Q1. UPM Plywood had a steady performance in a good market situation.

“UPM Energy improved earnings due to higher electricity prices and volumes. Electricity generation was held back by the annual maintenance shutdown at Olkiluoto power plant and weakened hydropower availability during the quarter.

“UPM Specialty Papers enjoyed good market demand and increased prices, but was not able to fully offset the higher pulp costs.

“We look to the future with confidence. In the second half of the year we have every opportunity to respond to customer demand with growing deliveries. Our ongoing focused growth projects enable us to develop our market position while maintaining and growing our earnings. During the quarter we announced new focused growth investments in Germany and in China in the attractive release liner business.

“Our transformative prospects provide us with unique and exciting opportunities for significant long-term earnings growth. In Uruguay, the second preparation phase for the potential new world-class pulp mill is proceeding well. In attractive biomolecular businesses we continue to prepare for the potential first industrial-scale biochemical refinery in Germany and study the potential biofuels scale up in Finland.

“In 2009, we redefined UPM as the Biofore Company, creating a new, future-oriented industry category characterized by efficiency, innovation and sustainability. This positioning gave a name to our transformation, energizing both UPMers as well as our stakeholders. We continue to be inspired by the limitless opportunities of bioeconomy. We are committed to delivering renewable and responsible solutions and innovating for a future beyond fossils."

Outlook 2018

“UPM's comparable EBIT is expected to continue growing in 2018 compared with 2017. H2 2018 comparable EBIT is expected to be significantly higher compared with H1 2018.

“The fundamentals for UPM businesses in 2018 are favourable. Sales price increases in 2018 are expected to outweigh the increase in variable cost, compared with 2017.

“H1 2018 results were impacted by four significant maintenance shutdowns and weather-related wood harvesting limitations. H2 2018 is scheduled to have one significant maintenance shutdown."

Through the renewing of the bio and forest industries, UPM is building a sustainable 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