UPM reports solid Q4 results with decreased costs and improved efficiency

Stock Exchange Release 30.1.2014 10:12 EET

Q4 Operating profit excluding special items was EUR 207 million (EUR 146 million
Q4 2012)

UPM-Kymmene Corporation   Financial Statements Release         30 January 2014 at 10:12


Q4/2013 (compared with Q4/2012)

• Earnings per share excluding special items were EUR 0.27 (0.20), and reported EUR 0.06 (-2.83)

• Operating profit excluding special items was EUR 207 million, 8.0% of sales (146 million, 5.5% of sales)

• EBITDA was EUR 302 million, 11.7% of sales (317 million, 11.9% of sales)

• 48% of the targeted annualised EUR 200 million cost savings achieved in Q4/2013

• Operating cash flow was EUR 262 million, net debt decreased to EUR 3,040 million

Full year 2013 (compared with 2012)

• Earnings per share excluding special items were EUR 0.91 (0.74), and reported EUR 0.63 (-2.14)

• Operating profit excluding special items was EUR 683 million, 6.8% of sales (556 million, 5.3% of sales)

• EBITDA was EUR 1,155 million, 11.5% of sales (1,312 million, 12.5% of sales)

• UPM introduced a new business structure and is implementing a profit improvement programme and focused growth initiatives

• Board’s proposal for dividend per share EUR 0.60 (0.60)


Key figures  Q4/2013  Q4/2012  Q1–Q4/2013  Q1–Q4/2012 
Sales, EURm  2,588 2,657 10,054 10,492
  EBITDA, EURm 1)  302 317 1,155 1,312
  % of sales  11.7 11.9 11.5 12.5
Operating profit (loss), EURm  134    –1,659 548   –1,318
  excluding special items, EURm  207 146 683 556
  % of sales    8.0  5.5 6.8 5.3 
Profit (loss) before tax, EURm  115    –1,690 475    –1,271
  excluding special items, EURm  188 123 610 471
Net profit (loss) for the period, EURm  36    –1,486 335 –1,122
Earnings per share, EUR   0.06    –2.83 0.63 –2.14
  excluding special items, EUR   0.27  0.20 0.91 0.74
Operating cash flow per
share, EUR 
 0.49  0.69 1.39 1.98
Equity per share at end
of period, EUR 
14.08  14.18 14.08 14.18
Gearing ratio at end of period, %  41 43 41 43
Net interest-bearing liabilities
at end of period, EURm 
3,040 3,210 3,040 3,210

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 last quarter of 2013 was a satisfactory conclusion to a year which started off with a brisk headwind. In Q4 we achieved our best quarterly business performance in 2013. Part of this was due to seasonal factors, but a significant part comes from the wide range of improvement efforts we made throughout the year. Operating profit excluding special items was EUR 207 million (146 million). Due to strong operating cash flow we were able to reduce our net debt by EUR 261 million during Q4.

We are very pleased that UPM Biorefining, UPM Plywood and UPM Paper ENA (Europe and North America) were able to achieve a significant improvement in their financial performance with proactive internal measures.

Many pulp mills in the Biorefining business area were able to break their production records last year which boosted our pulp volumes. The granted permission to increase pulp production in Uruguay also positively impacted the result of the final quarter in 2013.

Plywood performance has improved consistently, and in Q4 achieved its best quarter since 2008. In Plywood, both the sales strategy as well as the production efficiency have been revised with excellent results.

In Paper ENA decreasing volumes and prices as well as unfavorable currencies were sources of serious headwind throughout the year and called for strong improvement actions. We responded with heavy cost savings both in the business and in the supporting functions. In Q4 Paper ENA managed to restore its profitability to the level of the previous year. It is fair to say that at the end of the year the business has a significantly more competitive cost structure than in early 2013.

UPM Energy suffered from mild weather and lower hydropower volumes in Q4 but was nevertheless able to maintain unchanged average electricity prices. In UPM Raflatac the sales development was positive, particularly in the growth markets. Despite challenging currency development in Asia, the performance of UPM Paper Asia was satisfactory.

We made good progress with our Biofore strategy in 2013. A key milestone was the implementation of the new business structure in November. The new organisation has started off well and we expect the new structure to sharpen our operational focus further in each business.

Simultaneously with the new structure we announced a short term profitability improvement programme targeting EUR 200 million cost savings by the end of 2014. Implementation of the programme has proceeded fast and in Q4 we had achieved 48% of the targeted savings.

I’m proud of the change readiness that UPM’ers have shown in the face of these changes. This gives us confidence in proceeding further with our profitability and growth initiatives. Over the coming three years, we have set ourselves clear targets for our growth initiatives in biofuels, woodfree speciality papers in China, label materials and pulp production. In parallel with this process we also seek to simplify our business portfolio. Our goal is to enhance the value of UPM businesses, ” says Jussi Pesonen.

Outlook for 2014

Growth in the European economy is expected to remain low in 2014, but improve from last year. Growth in the US and in the developing economies is expected to continue to outperform Europe.

This environment is expected to be supportive for the global pulp and label materials demand, as well as paper demand in Asia. The slight improvement in the European economy may moderate the negative demand development seen in the European graphic paper market in the past two years and stimulate European demand for wood products. The current hydrological situation in Finland is close to the long-term average level, and the forward electricity prices in Finland for H1 2014 are somewhat lower than the realised market prices in H1 2013.

UPM’s business outlook for H1 2014 is broadly stable.

In H1 2014, UPM’s performance is expected to be underpinned by a stable overall outlook for UPM Energy, UPM Raflatac, UPM Paper Asia and UPM Plywood, as compared to H2 2013.

Profitability in UPM Paper ENA is expected to improve due to the on-going cost reduction measures. In H1 2014 compared to H2 2013 however, performance will be negatively impacted by lower delivery volumes, including seasonal factors.

UPM Biorefining is starting the year in a stable market. Capacity additions in the global pulp market may impact the pulp market balance unfavourably during 2014, depending on the timing of the new start-ups.

Dividend for 2013

The Board of Directors proposes to the Annual General Meeting (to be held on 8 April 2014) that a dividend of EUR 0,60 per share to be paid in respect of the financial year on 24 April 2014. The dividend will be paid to shareholders registered in the Company’s shareholder register held by Euroclear Finland Oy on the record date of dividend payment, being 11 April 2014.

Conference call and press conference

UPM's President and CEO Jussi Pesonen will present the results in a conference call and a webcast for analysts and investors, held in English language, on 30 January 2014 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.

Conference call details:

The conference call can be participated in either by dialing 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 dialing in 5-10 minutes prior to ensure a timely start of the conference.

The presentation is available at www.upm.com for 12 months after the call.

Conference call title: UPM - Financial Statements for the year 2013

Direct telephone numbers:

BE: +32 2404 0642

DK: +45 3544 5579

FI: +35 8981 7104 62

FR: +33 1707 220 26

NO: +47 2350 02 04

SE: +46 8519 993 63

UK: +44 2031 9405 44

US: +18 5571 615 89

International telephone numbers with a pin:

AU: +61 2 8073 0498

AT: +43 1 928 6161

CH: +41 44 580 65 22

DE: +49 69 2017 44 210

ES: +34 914 142 009

HK: +852 580 83239

IN: +91 22-3301 9422

IR: +353 1 447 5418

IT: +39 02 3600 6663

JP: +81 3 5050 5409

NL: +31 20 716 80 20

SP: +65 3158 2497

PIN: 204055#

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. For more detailed information about risk factors, see pages 74–75 of the company’s annual report 2012.

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 Paper Asia, UPM Paper Europe and North America and UPM Plywood. Our products are made of renewable raw materials and are recyclable. We serve our customers worldwide. The group employs around 21,000 people and its annual sales are approximately € 10 billion. UPM shares are listed on NASDAQ OMX Helsinki. UPM – The Biofore Company – www.upm.com

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Stakeholder Relations

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284