PaperAge Magazine

UPM Reports Strong Third Quarter Results on Operational Efficiency, Volumes

Jussi Pesonen "The third quarter was another excellent quarter for UPM. The markets were favourable and we achieved good growth in delivery volumes. We also succeeded in mitigating input cost inflation with sales price increases and cost efficiency measures." – Jussi Pesonen, President and CEO, UPM.

Oct. 24, 2017 – UPM's President and CEO Jussi Pesonen said the company had an “excellent” third quarter with good growth in deliveries and strong operational efficiency with no significant maintenance activity.

The following are Mr. Pesonen's comments on UPM's third quarter 2017 results:

"The third quarter was another excellent quarter for UPM. The markets were favourable and we achieved good growth in delivery volumes. We also succeeded in mitigating input cost inflation with sales price increases and cost efficiency measures. Our operational efficiency was strong in a quarter with no significant maintenance activity.

Our comparable EBIT increased by 12 per cent to EUR 351 million. Operating cash flow was strong at EUR 486 million and net debt decreased to EUR 623 million, representing 0.4 times EBITDA.

UPM Biorefining benefitted from higher pulp prices and good delivery growth. UPM Raflatac, UPM Specialty Papers and UPM Plywood were able to largely offset higher input costs by increasing deliveries and sales prices. In UPM Energy the hydropower generation recovered to normal level.

UPM Paper ENA was able to report the best quarter of this year, despite the significant increase in fibre costs. This is the outcome of consistent and continuous work for cost efficiency and competitiveness as well as the stringent execution of commercial strategies. In order to succeed also next year, we need to take timely measures in capacity management and cost savings.

In addition to our strong performance we are pleased to see good progress in our transformation, including our initiatives for future growth.

This morning we announced another growth project in our top-performing plywood business. The expansion of the UPM Chudovo plywood mill in Russia will enable us to grow in attractive plywood segments in a highly competitive way. Our ongoing growth projects in pulp and in self-adhesive labels are proceeding well and will strengthen our position in the growing markets in 2018. UPM Kymi pulp mill expansion is already starting production in the fourth quarter.

UPM aims to grow in new biomolecule businesses. I'm pleased to say that the Lappeenranta Biorefinery has now reached the designed capacity of renewable diesel and naphtha and generates a good financial return. The biorefinery was the first significant investment in new innovative wood-based products. Today we reported on our progress towards entering a new sustainable biochemicals business. After more than five years of research and piloting we have now entered the basic engineering phase, targeting industrial scale production of biochemicals in Germany.

When it comes to longer-term growth opportunities in pulp, the discussions continue with the Government of Uruguay concerning infrastructure development and other local prerequisites for a potential pulp mill investment.

Despite seasonal quarterly variations, we have consistently continued our improvement trend in profitability and our financial standing for several years. The third quarter marks the 18th consecutive quarter of improving profits. At the same time with the improving performance, we have proceeded step by step in our business transformation, and this work will continue."

Outlook for 2017

"UPM's profitability improved significantly in 2016 and is expected to continue on a good level in 2017. Comparable EBIT is expected to increase in 2017 compared with 2016.

Demand growth is expected to continue for most of UPM's businesses, while demand decline is expected to continue for UPM Paper ENA. The focused growth projects continue to contribute to UPM's performance.

Following a deflationary environment in recent years, 2017 is expected to show modest input cost inflation. UPM will continue measures to reduce fixed and variable costs to mitigate this.

Q4 2017 is expected to include more maintenance activity than Q3 2017 in UPM Biorefining and UPM Paper ENA."

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