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UPM Interim Report Q1/2018: UPM continues to grow earnings - Strong customer demand in all businesses

Walden-Mott Corp.  04-26-2018 13:13:11
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Jussi Pesonen, President and CEO, comments on Q1 results: "Commercially the first quarter was excellent. Customer demand was strong and we succeeded in increasing sales prices in all businesses, practically in all products. With this we were able to expand our margins and recover the impact of clearly higher input costs.

Our comparable EBIT increased by 17% to EUR 355 million, marking the 20th consecutive quarter of earnings growth. Operating cash flow was at EUR 208 million and net debt decreased to EUR 41 million during the quarter.

UPM Biorefining benefitted from significantly higher pulp prices in the first quarter. Operationally, however, the quarter left room for improvement. Challenges in wood harvesting and operational efficiency limited our production and we were not able to fully benefit from the strong market demand.

UPM Energy achieved an excellent result with higher electricity prices and a good level of hydropower generation.

UPM Communication Papers (formerly UPM Paper ENA), UPM Specialty Papers and UPM Plywood continued good performance. They were able to offset most of the heavy cost increases with sales price actions in favourable customer demand and tight markets.

The market demand was also good for self-adhesive labels. UPM Raflatac was able to restore its unit margins with price increases after 12 months of continued heavy input cost increases, but gave up some volumes in the process.

We are making progress in our transformative prospects. In Uruguay, the second preparation phase for the potential new pulp mill is proceeding. The permitting processes for the mill, rail and port, as well as rail tendering have started as agreed with the Government of Uruguay.

In UPM Biochemicals, the basic engineering work for the potential industrial scale biochemical refinery in Germany is proceeding at full speed. Results are expected by the end of the year.

In UPM Biofuels, we continue to explore future opportunities by carrying out an environmental impact study in Kotka, Finland, as a potential location for a new biorefinery.

I am pleased to say that UPM is in good shape. Global megatrends drive demand growth for sustainable and safe solutions that we provide. We will create value by seizing the limitless opportunities of bioeconomy."

Outlook for 2018

UPM reached record earnings in 2017 and its comparable EBIT is expected to increase further in 2018 compared with 2017.

The fundamentals for UPM businesses in 2018 continue to be favourable. Healthy demand growth is expected to continue for most UPM businesses in 2018, while demand decline is expected to continue for UPM Communication Papers. Sales prices are expected to be higher in UPM businesses in 2018 compared with 2017.

Input costs are expected to be higher in 2018 compared with 2017. In order to mitigate this, UPM will continue to implement measures to reduce fixed and variable costs. 2018 has started with less favourable currency exchange rates than 2017.

Q2 2018 results will be impacted by significant maintenance activity, especially in UPM Biorefining.

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