UPM’s H1 cash flow from ongoing businesses improved; balance sheet strengthened further

UPM-Kymmene Corporation    Stock exchange release   7 August 2012     at 9.30EET

 
Q2/2012

  • Earnings per share excluding special items were EUR 0.14 (0.26), and reported EUR 0.17 (0.56)
  • EBITDA was EUR 316 million, 12.1% of sales (372 million, 15.4% of sales)
  • EBITDA was affected by seasonally higher fixed costs and fair value losses of cash flow hedges
  • Net debt decreased by EUR 71 million to EUR 3,385 million after the dividend payment and asset sales
     

Q1–Q2/2012

  • Earnings per share excluding special items were EUR 0.36 (0.58), and reported EUR 0.39 (0.89)
  • EBITDA was EUR 663 million, 12.7% of sales (751 million, 15.7% of sales)
  • EBITDA increased from H2 2011 driven by improved profitability of UPM’s businesses
  • Operating cash flow was EUR 343 million (446 million), after restructuring payments of EUR 140 million

 

Key figures   
 
Q2/2012 Q2/2011 Q1-Q2/2012 Q1-Q2/2011 Q1-Q4/2011
Sales, EURm 2,619 2,423 5,210 4,779 10,068
EBITDA, EURm 1) 316 372 663 751 1,383
% of sales 12.1 15.4 12.7 15.7 13.7
Operating profit (loss), EURm    92 289 247 487 459
excluding special items, EURm    118 201 269 399 682
% of sales 4.5 8.3 5.2 8.3 6.8
Profit (loss) before tax, EURm    101 316 242 511 417
excluding special items, EURm  92 160 229 355 572
Net profit (loss) for the period, EURm    87 295 204 464 457
Earnings per share, EUR 0.17 0.56 0.39 0.89 0.88
excluding special items, EUR 0.14 0.26 0.36 0.58 0.93
Operating cash flow per share, EUR 0.25 0.54 0.65 0.86 1.99
Shareholders’ equity per share at end of period, EUR 14.11 13.81 14.11 13.81 14.22
Gearing ratio at end of period, %   46 44 46 44 48
Net interest-bearing liabilities at end of period, EURm 3,385 3,162 3,385 3,162 3,592

1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets, excluding the share of results of associated companies and joint ventures, and special items.

Jussi Pesonen, President and CEO, comments on the result

“The profitability of UPM’s businesses improved in the first half of the year 2012 compared to the second half of 2011. We achieved this by continuing our consistent work to reduce fixed costs. Furthermore, sales prices and raw material costs developed favourably.

In the second quarter, our growth businesses – Energy, Pulp, Asian Paper and Label - maintained strong profitability. However, the Group’s operating profit was affected by the exceptional quarter in Other operations, mainly due to fair value losses in currency hedges.

In Paper, deliveries recovered somewhat from the previous quarter, although this was offset by seasonally higher fixed costs. Myllykoski cost synergies were well on track with two thirds of planned benefits already realised. Despite this, Paper’s profitability level remains unacceptable.


Weakness in the general economic conditions affect UPM businesses, particularly in Europe. In these conditions, the continuing realisation of Myllykoski synergies works for our benefit.

UPM has used the full tool kit of industry consolidation, restructuring and cost control to improve competitiveness and cash flow, and will continue to do so. Overall, I am confident that our low cost, low investment position enables healthy free cash flow generation, regardless of the demand scenario.

I would like to highlight that, since the closing of the Myllykoski acquisition in August 2011, we have reduced our net debt by approximately EUR 600 million. Also, during the second quarter, solid cash flow continued and our balance sheet strengthened further. The reliable cash flow and healthy balance sheet give us room to consider our next strategic measures.

The Lappeenranta biodiesel investment is our first step in becoming the leading producer of wood-based advanced biofuels, and we will continue to evaluate future opportunities in all of our growth businesses”, Pesonen concludes.
 

Outlook for 2012

Global economic growth is expected to continue in 2012. In Europe, economic growth is weak and uncertainty persists. During the summer, there has been an increase in the risks related to both to the European sovereign debt problems and the growth prospects of the Chinese economy.

Profitability in UPM’s businesses improved in H1 2012 compared with H2 2011. In H2 2012, profitability in UPM’s businesses is not expected to improve materially compared with H1 2012.

Operating profit excluding special items for the full year 2012 is expected to be lower than in 2011.

UPM’s cost level decreased in H1 2012. Variable costs are expected to remain largely on the same level in Q3 2012. The realisation of the Myllykoski cost synergies is expected to continue as planned, and cost synergies of more than EUR 150 million are expected to affect UPM’s full­year 2012 results.
 
Capital expenditure for 2012 is forecast to be approximately EUR 350 million.

The full outlook is available in the Interim report.

 
For more information, please contact:
Mr Jussi Pesonen, President and CEO, UPM, tel. +358 204 15 0001
Mr Tapio Korpeinen, CFO, UPM, tel. +358 204 15 0004


Webcast and press conference:

UPM's President and CEO, Jussi Pesonen, will present the Interim Report in a conference call and webcast for analysts and investors, held in the English language, on 7 August at 13:00 Finnish time (11:00 BST, 06:00 EDT).


Later in the afternoon, UPM's President and CEO, Jussi Pesonen, will present the Interim Report in a press conference held in the Finnish language at the UPM Group Head Office in Helsinki (main entrance, Eteläesplanadi 2) on 7 August at 14:15 Finnish time (12:15 BST, 07:15 EDT).

Conference call and webcast details:

To participate in the conference call, either dial a number from the list below or follow the webcast online at www.upm.com. 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 early to ensure a timely start to the conference.

Conference call title: UPM-Kymmene Corporation Interim Report January-June 2012

Conference ID: 914125

Telephone numbers:

Participant - US:   +1 334 323 6201
Participant - Australia LC:   +61 (0)28 2239 543
Participant - Hong Kong LC:   +852 300 278 26
Participant - Japan LC:   +81 (3)45 8001 94
Participant - Malaysia LC:   +60 (0)37 7124 471
Participant - New Zealand LC:   +64 (0)99 1924 18
Participant - Singapore LC:   +65 6823 2169
Participant - South Korea LC:   +82 (0)23 4831 070
Participant - Taiwan LC:   +886 (0)22 1626 701
Participant - Austria:   +43 (0)268 2205 6292
Participant - Belgium:   +32 (0)2 290 14 07
Participant - Czech Republic:   +420 (2)3900 0635
Participant - Denmark:   +45 3271 4607
Participant - Finland:   +358 (0)9 2313 9201
Participant - France:   +33 (0)1 7099 3208
Participant - Germany:   +49 (0)695 8999 0507
Participant - Hungary:   +36 (0)618 8932 15
Participant - Ireland:   +353 (0)1 4364 106
Participant - Italy:   +39 023 0350 9003
Participant - Luxembourg:   +352 270 0073 408
Participant - Netherlands:   +31 (0)20 7965 008
Participant - Norway:   +47 2156 312 0
Participant - Spain:   +34 917 889 507
Participant - Sweden:   +46 (0)8 5052 0110
Participant - Switzerland (Geneva):   +41 (0)2 2592 7007
Participant - Switzerland (Zurich):   +41 (0)434 5692 61
Participant - UK:   +44 (0)20 7162 0077

The webcast can be replayed at www.upm.com for 12 months.

***

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 that 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, the 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. For more detailed information about risk factors, see pages 103–105 of the company’s annual report 2011.

***

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
media@upm.com
www.upm.com
www.twitter.com/UPM_News