PaperAge Magazine

UPM Reports Third Quarter 2016 Results

Jussi Pesonen "UPM's performance in the third quarter was excellent and demonstrated the strength of our business model. Our growth projects and cost-efficiency measures continued to deliver. – Jussi Pesonen, President and CEO, UPM.

Oct. 25, 2016 – UPM today report results for the third quarter 2016.

Q1-Q3 2016 highlights

  • Comparable EBIT increased by 28% to EUR 859 million (669 million).
  • Operating cash flow increased to EUR 1,281 million (795 million).
  • Net debt decreased to EUR 1,479 million (2,465 million) and gearing to 19% (31%).
  • UPM sold the Schwedt newsprint mill in Germany in July.
  • In July, UPM announced expansion of the UPM Kymi pulp mill capacity to 870,000 tonnes.
  • In October, UPM announced a new self-adhesive label stock investment in Poland to meet the growing demand in Europe.

UPM's President and CEO, Jussi Pesonen, made the following comments on the third quarter results:

"UPM's performance in the third quarter was excellent and demonstrated the strength of our business model. Our growth projects and cost-efficiency measures continued to deliver. UPM Paper ENA was particularly successful in this seasonally strong quarter. Our comparable EBIT increased by 31% and our operating cash flow reached record-strong EUR 506 million. Furthermore, our net debt was EUR 986 million lower than a year ago.

UPM Paper ENA's performance shows that value can also be created in a challenging business environment. Successful commercial strategy, continued strict cost management and optimal use of assets deliver results. This was particularly visible in the seasonally strong third quarter, as operational efficiency was on a high level and fixed costs very low.

Going forward, we expect the structural decline in demand of graphic papers in Europe to continue as in the recent years. Therefore we are in the process of conducting a review of our European graphic paper assets. Any potential restructuring plans would be announced in the near future.

Our growth investments continued to gather pace, and contributed significantly to the earnings growth. On top of the pulp and self-adhesive label investments, the Lappeenranta biorefinery and the specialty paper machine in UPM Changshu made good contributions to our performance. We have now reached 80% of the EUR 200 million EBITDA target we have set for this first wave of growth investments.

Our second wave of focused growth investments is proceeding well. The Otepää plywood mill and UPM Kaukas pulp mill expansions are ramping up in the fourth quarter. The second expansion of UPM Kymi pulp mill is proceeding according to plans. In October, we announced a EUR 35 million investment in UPM Raflatac factory in Poland to meet the increasing label stock demand in Europe. In Uruguay we are continuing negotiations on prospects for long-term development.

All in all, we have every reason to be pleased with the quarter. Our strong cash flow enables both focused growth investments and attractive distribution to shareholders. A strong balance sheet gives us the opportunity to accelerate business transformation, when the opportunity and timing are right. UPM aims to maintain a strong balance sheet in all situations."

Outlook for 2016

UPM's outlook for 2016 is unchanged. Profitability is expected to improve in both the full year 2016 and H2 2016, compared with last year. Q4 2016 performance is expected to be negatively impacted compared to Q3 2016 by seasonal factors and clearly higher maintenance activity in UPM Biorefining and UPM Paper ENA.

UPM's growth projects are expected to contribute positively to the company's earnings in 2016, compared with 2015. UPM is continuing its measures to reduce variable and fixed costs in 2016. Currencies are expected to contribute positively as hedges have rolled over.

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