UPM-Kymmene Corporation Interim Report 24 October 2017 at 09:35 EET
Excellent quarter, further steps in transformation
Q3 2017 highlights
Q1-Q3 2017 highlights
Jussi Pesonen, President and CEO, comments on the Q3 result:
"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.
Webcast and press conference
UPM's President and CEO Jussi Pesonen will present the financial results in a webcast and a conference call for analysts and investors, held in English language, today at 13:15 EET.
Later in the afternoon, Jussi Pesonen will present the results in a press conference held in Finnish language at the UPM Group Head Office (The Biofore House) in Helsinki, Alvar Aallon katu 1, at 14:30 EET.
Webcast and conference call details:
The conference call can be participated in either by dialling a number in the list below or following the webcast online at www.upm.com or through this link.
Only participants who wish to ask questions in the conference call need to dial in. All participants can view the webcast presentation online. We recommend that participants start dialling in 5-10 minutes prior to the event in order to ensure a timely start of the webcast.
The presentation is available at www.upm.com for 12 months after the call.
Conference call title: UPM Interim Report for January - September 2017
Direct telephone numbers:
BE: +3224040635DK: +45 823 331 78FI: +358981710495UK: +442031940552SE: +46856642702US: +18557161597NO: +4723500211
International telephone numbers with a pin code 53322520#
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It should be noted that certain statements herein, which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by "believes", "expects", "anticipates", "foresees", or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein including the availability and cost of production inputs, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. The main earnings sensitivities and the group's cost structure are presented on page 115 of the 2016 Annual Report. Risks and opportunities are discussed on pages 22-23 and risks and risk management are presented on pages 98-99 of the report.
UPM-Kymmene CorporationPirkko HarrelaExecutive Vice President, Stakeholder Relations
UPM, Media RelationsMon-Fri from 9:00 to 16:00 EETtel. +358 40 588 3284 firstname.lastname@example.org
UPMThrough 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. Our products are made of renewable raw materials and are recyclable. We serve our customers worldwide. The group employs around 19,300 people and its annual sales are approximately EUR 10 billion. UPM shares are listed on NASDAQ OMX Helsinki. UPM - The Biofore Company - www.upm.com
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UPM presents certain performance measures of performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of alternative performance measures are presented in notes to the consolidated financial statements in UPM Annual Report.
UPM Interim Report Q3 2017