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  • Interim report Q3/2014: UPM achieves EUR 200 million profit improvement target ahead of schedule, Net debt at lowest level in 15 years

Interim report Q3/2014: UPM achieves EUR 200 million profit improvement target ahead of schedule, Net debt at lowest level in 15 years

Stock Exchange Release 28.10.2014 9:35 EET

UPM-Kymmene Corporation   Interim report      28 October 2014 at 09:35 EET

Q3 2014 compared with Q3 2013

• Earnings per share excluding special items were EUR 0.32 (0.26), and reported EUR 0.34 (0.26)
• Operating profit excluding special items increased to EUR 235 million, 9.7% of sales (194 million, 7.8% of sales), due to the success of the profit improvement programme
• EBITDA was EUR 346 million, 14.3% of sales (311 million, 12.6% of sales)
• The full targeted annualised cost savings of EUR 200 million were achieved in Q3 2014, ahead of schedule

 Q1–Q3 2014 compared with Q1–Q3 2013

• Earnings per share excluding special items were EUR 0.85 (0.64), and reported EUR 0.95 (0.57)
• Operating profit excluding special items increased to EUR 617 million, 8.4% of sales (476 million, 6.4% of sales), due to the success of the profit improvement programme
• EBITDA was EUR 957 million, 13.0% of sales (853 million, 11.4% of sales)
• Growth projects progressed in UPM Biorefining, UPM Paper Asia and UPM Raflatac
• Strong operating cash flow at EUR 779 million (473 million), net debt decreased to EUR 2,726 million

Key figures Q3/2014 Q3/2013 Q2/2014 Q1-Q3/2014 Q1-Q3/2013 Q1-Q4/2013
Sales, EURm 2,415 2,472 2,441 7,337 7,466 10,054
EBITDA, EURm 346 311 298 957 853 1,155
   % of sales 14.3 12.6 12.2 13.0 11.4 11.5
Operating profit (loss), EURm 236 187 176 603 414 548
   excluding special items, EURm 235 194 186 617 476 683
   % of sales 9.7 7.8 7.6 8.4 6.4 6.8
Profit (loss) before tax, EURm 214 166 159 610 360 475
   excluding special items, EURm 213 173 169 558 422 610
Profit (loss) for the period, EURm 182 138 129 504 299 335
Earnings per share, EUR 0.34 0.26 0.25 0.95 0.57 0.63
   excluding special items, EUR 0.32 0.26 0.26 0.85 0.64 0.91
Operating cash flow per share, EUR 0.57 0.55 0.40 1.47 0.90 1.39
Equity per share at end of period, EUR 14.33 14.01 13.76 14.33 14.01 14.08
Gearing ratio at end of period, % 36 45 40 36 45 41
Net interest-bearing liabilities at end of period, EURm 2,726 3,301 2,925 2,726 3,301 3,040

Jussi Pesonen, President and CEO comments on the result:

“UPM posted a strong third quarter 2014 thanks to the success of the profit improvement programme and very good operational efficiency in all businesses. I’m particularly pleased with our cash flow performance and balance sheet as this provides the foundation for both dividend growth and the ability to continue the transformation of the company.

Our new business structure has been operational for 12 months now and the profit improvement programme we started with the new organisation has been completed ahead of schedule. These 12 months have shown that this organisation is capable of delivering results. Our operating profit has improved by 21% compared to Q3 in 2013 and by 30% during the first nine months of 2014.

Compared to Q3 2013, UPM Paper ENA (Europe and North America), UPM Paper Asia and UPM Plywood were all successful in their efforts to improve profitability and lower costs. In UPM Paper ENA, the operating profit also included energy-related refunds in Europe.

In UPM Biorefining, flawless operational efficiency enabled a good result despite the headwind from prices.  

In addition, UPM Raflatac managed to increase its operational efficiency and delivery volumes.

In UPM Energy, profitability continued on a good level.

We have reached our 200 M€ profit improvement target ahead of schedule, and we have identified further improvement potential. Also the growth outlook, particularly in Europe, remains weak. Therefore, it is time to set a new profit improvement goal. We are preparing a new plan including fixed and variable cost savings. We are analysing the means and tools at our disposal and will communicate a new profit improvement target in the next few weeks.

As for our strategic growth projects, we are well on track in terms of achieving our target of EUR 200 million of additional EBITDA.

The Lappeenranta biorefinery, the first of its kind in the world, will start producing clean, advanced renewable diesel during the fourth quarter. In Pulp, the construction works at the Kymi mill extension are on schedule. Investments in both wood-free speciality grades and labelling materials in China, as well as UPM Raflatac’s expansion in the self-adhesive labels are also making solid progress.

Overall, UPM is in a strong position to undertake future opportunities. We have a new profit improvement programme in preparation and our growth projects proceed well. Furthermore, our cash flow and balance sheet are very strong, enabling the continuing transformation of the company,” said Pesonen.

Outlook for 2014

Growth in the European economy has been modest in 2014, but has improved over last year. The outlook for economic growth in Europe has weakened somewhat during the autumn. In the US, growth has been stable at a moderate level, whereas growth is expected to continue in the developing economies.

This environment is expected to be supportive for the global pulp and label materials demand, as well as paper demand in Asia. The graphic paper demand in Europe is expected to decline moderately. The current hydrological situation in Finland is below the long term average level. Based on forward prices, electricity prices in Finland in H2 2014 are expected to be slightly lower than in H2 2013.

UPM’s business outlook is broadly stable.

In H2 2014, UPM’s performance is expected to be underpinned by similar or slightly better performance in UPM Paper ENA, UPM Paper Asia, UPM Raflatac, UPM Plywood and UPM Energy, when compared to H2 2013.

UPM Biorefining’s performance in H2 2014 compared to H2 2013 continues to be impacted by lower chemical pulp prices. Commercial production of renewable diesel at the Lappeenranta refinery is expected to start during Q4 2014, but the impact on UPM Biorefining’s earnings during H2 2014 is expected to be minor.

Q4 2014 is expected to be impacted by seasonally higher fixed costs, the year-end stoppages in the company’s paper mills as well as the maintenance shutdown of the Fray Bentos pulp mill, when compared to Q3 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 28 October 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 Q3 - Interim Report January - September 2014

Direct telephone numbers:
BE: +32 2404 0642
DK: +45 3544 5588
FI: +358 9 8171 0465
FR: +33 1707 220 26
NO: +47 2350 0213
SE: +46 8519 993 55
UK: +44 2031 940 550
US: +1 855 269 2605

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
IT:+39 02 3600 6663
JP:+81 3 5050 5409
NL:+31 20 716 80 20


PIN: 712779#

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 73–74 of the company’s annual report 2013.

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

UPM, Media Desk 
9.00-16.00 EET
tel. +358 40 588 3284 

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