UPM-Kymmene Corporation Stock exchange release 7 August 2012 at 9.30EET
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 0001Mr Tapio Korpeinen, CFO, UPM, tel. +358 204 15 0004Webcast 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.
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Conference call title: UPM-Kymmene Corporation Interim Report January-June 2012
Conference ID: 914125
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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.
Executive Vice President, Corporate Communications
UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284