PaperAge Magazine

UPM CEO Says 2018 a Record Year on Growth of Sales

Jussi Pesonen "2018 was a record year for UPM. We achieved record earnings and our net debt fell below zero. Our sales grew by 5% and comparable EBIT increased by 17% in 2018." – Jussi Pesonen, President and CEO, UPM.

Jan. 31, 2019 - UPM's President and CEO, Jussi Pesonen, made the following comments on fourth quarter and full year 2018 results:

“2018 was a record year for UPM. We achieved record earnings and our net debt fell below zero. The year was a commercial success and we succeeded in mitigating higher input costs. We laid the groundwork for future growth in our current and innovative new businesses and received exceptional recognition for our responsibility performance. The results in 2018 demonstrate the impact of many years of transformation and I wish to thank all UPMers and our partners for achieving excellent results together.

Our sales grew by 5% and comparable EBIT increased by 17% in 2018. Our cash flow was strong, and we finished the year with a record low negative net debt of EUR -311 million.

While the uncertainties in the global economy increased towards the end of the year, we delivered a strong fourth quarter. This marked the 23rd consecutive quarter of earnings growth. Our sales grew in Q4 by 6% and comparable EBIT increased by 10% to EUR 404 million.

UPM Biorefining had an excellent fourth quarter. Our pulp deliveries resumed growth despite the Pietarsaari mill maintenance shutdown. Biofuels continued to operate on a new level of profitability and production, which was achieved after the Q2 turnaround shutdown.

UPM Communication Papers continued to increase its earnings despite steadily declining market demand and steep increase in variable costs. This shows the result of consistent work for customer commitment, cost efficiency and effective use of assets. Also UPM Energy continued to improve its performance thanks to higher prices, even though hydropower volumes remained very low.

UPM Raflatac resumed sales growth, but its quarter was still impacted by variable cost increases. UPM Plywood enjoyed good demand, but deliveries were unfortunately held back by political strikes in Finland.

UPM Specialty Papers had a disappointing quarter. In the Asian fine paper business, margins continued to be under pressure as destocking in the value chain continued to pressure prices and pulp costs remained high. However, good demand continued in the label paper and release liner businesses. We will focus on measures to restore the profitability of the business.

Looking forward, we are excited about 2019. UPM is in great shape with competitive businesses, aiming higher culture and consistently strong cash flow. Additionally, we have net cash in the balance sheet, which is unforeseen in this industry.

Furthermore, we look forward to our transformative prospects that provide us with unique opportunities for significant long-term earnings growth. In Uruguay, preparations for the potential new world-class pulp mill are proceeding. The implementation of the investment agreement between UPM and the Government of Uruguay is now in an intensive phase, where tangible progress in the infrastructure initiatives is required. In January, we announced that UPM is taking part in the international public tendering process in the port of Montevideo. If the ongoing second preparation phase is concluded successfully, UPM will initiate the company's regular process of analysing and preparing an investment decision on the potential pulp mill project.

In UPM Biochemicals, we are continuing the basic engineering work for the potential first industrial-scale biochemicals refinery in Germany. In UPM Biofuels, we have completed the Environmental Impact Assessment for a possible biofuels refinery in Finland.

UPM's Board of Directors has today proposed a dividend of EUR 1.30 (1.15) per share for 2018, representing an increase of 13% from the previous year and 50% of operating cash flow per share. The proposal, which is above company's long-term dividend policy range of 30-40%, reflects UPM's exceptional financial position and confidence in future cash generation.

Overall, the long-term outlook for our businesses is stronger than ever. It is driven by global megatrends, more sustainable consumer choices and the need to reduce reliance on fossil resources. UPM is ready to grasp the limitless opportunities that bioeconomy offers for value creation and business growth."

Outlook for 2019

The global economic growth is estimated to continue in 2019, albeit at a slower pace than in 2018. There are, however, significant uncertainties related to this, including trade negotiations between China and the US, growth in China, the undefined nature of Brexit and political uncertainties in several countries. These issues may have an impact on the global economic growth and on UPM's product and raw material markets during 2019.

UPM reached record earnings in 2018. UPM's business performance is expected to continue at a good level in 2019.

In 2019, favorable demand is expected to continue for most UPM businesses. Demand decline is expected to continue for UPM Communication Papers.

In the beginning of the year 2019, pulp prices are expected to be lower and graphic paper prices in Europe are expected to be higher than in Q4 2018.

Input costs are expected to stabilise after the significant increases seen in 2018. UPM will continue measures to reduce both variable and fixed costs.

Fair value increases of forest assets are not expected to contribute meaningfully to comparable EBIT in 2019.

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