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  • UPM Half-Year Financial Report 2019: Margin management delivered continued earnings growth

UPM Half-Year Financial Report 2019: Margin management delivered continued earnings growth

Stock Exchange Release 23.7.2019 10:50 EEST

UPM-Kymmene Corporation                   Half-Year Financial Report         23 July 2019 at 09:50 EET

UPM Half-Year Financial Report 2019: Margin management delivered continued earnings growth 

Q2 2019 highlights

  • Sales grew by 1% to EUR 2,605 million (2,589 million in Q2 2018).
  • Comparable EBIT increased by 3% to EUR 345 million (334 million).
  • Cost environment started to moderate, fixed costs decreased mainly due to lower maintenance activity.
  • Operating cash flow increased to EUR 436 million (328 million).
  • Net debt decreased to EUR 366 million (401 million).

H1 2019 highlights

  • Sales grew by 4% to EUR 5,298 million (5,102 million in H1 2018).
  • Comparable EBIT increased by 4% to EUR 719 million (689 million).
  • Sales prices were higher, outweighing the impact of increased variable costs.
  • Operating cash flow increased to EUR 756 million (542 million).
  • UPM decided to close paper machine 10 at UPM Plattling, Germany.

Key figuresQ2/2019Q2/2018Q1/2019Q1
Sales, EURm2,6052,5892,6935,2985,10210,483
Comparable EBITDA, EURm 1)4664424889548981,868
  % of sales17.917.
Operating profit, EURm3193493736927341,895
Comparable EBIT, EURm3453343747196891,513
  % of sales13.212.913.913.613.514.4
Profit before tax, EURm3003373646647081,839
  Comparable profit before tax, EURm3253223666916631,457
Profit for the period, EURm2452693045495771,496
Comparable profit for the period, EURm2712583055765451,194
Earnings per share (EPS), EUR0.460.500.571.031.082.80
  Comparable EPS, EUR0.510.480.571.081.022.24
Return on equity (ROE), %
Comparable ROE, %11.111.612.311.912.512.9
Return on capital employed (ROCE), %
Comparable ROCE, %12.213.613.713.314.014.6
Operating cash flow, EURm 1)4363283207565421,330
Operating cash flow per share, EUR 1)0.820.610.601.421.022.49
Equity per share at end of period, EUR17.9116.3718.8417.9116.3718.36
Capital employed at the end of period, EURm10,8209,69111,31810,8209,69110,575
Net debt at the end of period, EURm366401-5366401-311
Net debt to EBITDA (last 12 m.)
Personnel at the end of period19,76019,83619,00819,76019,83618,978
1) The 2018 comparative figures have been restated due to accounting policy change of forest renewal costs. 

Jussi Pesonen, President and CEO, comments on Q2 results:

“The second quarter of the year marked the 25th consecutive quarter of increased earnings for UPM. This is a remarkable achievement, all the more so as economic growth remains modest, particularly in Europe. UPM has the tools to drive results in changing market conditions. Our operating model has enabled us to maintain good margins, which has had a favourable impact on our earnings. During the quarter, the cost environment started to moderate, too.

Our sales grew by 1% and comparable EBIT increased by 3% to EUR 345 million. Operating cash flow was strong, at EUR 436 million. Our balance sheet is truly industry leading. In the second quarter, we paid a dividend of EUR 693 million, and net debt at the end of the quarter was EUR 366 million.

UPM Biorefining reported a stronger second quarter than last year despite lower pulp prices. There was a consistent customer demand for pulp and our deliveries increased compared with the same quarter last year. Biofuels saw strong customer demand and performed very well. Maintenance activity was significantly lower than last year.

UPM Communication Papers reported a solid result. Prices remained at a good level, but the second quarter result was held back by the impact of reducing inventories. The development of paper demand in Europe has been somewhat weaker than last year. To ensure competitiveness, UPM Communication Papers is maintaining stringent cost control and asset optimisation. The closing of PM10 at UPM Plattling, Germany, was finalised in July, and the conversion of PM2 at UPM Nordland, Germany, continues.

UPM Raflatac reported stable earnings. Sales growth continued, although the slow economic environment, particularly in Europe, is impacting the demand for labels. Raflatac is continuing the fixed-cost reduction programme it started earlier in the year.

UPM Specialty Papers was able to recover earnings due to lower pulp costs, solid customer demand and slightly improved prices in the Asian fine paper markets. To stay on this track, Specialty Papers is continuing its cost management and product development initiatives. In addition, the ongoing investments at UPM Nordland and UPM Changshu are progressing well and will support our growth in a highly competitive way as of next year.

UPM Energy had an excellent quarter with a perfect combination of higher hydropower and nuclear power generation volumes, higher electricity sales prices and lower costs.

UPM Plywood maintained its profitability. Production at the UPM Chudovo, Russia, plywood mill expansion will commence during the third quarter, further improving the competitiveness of the business.

UPM is in great shape, competitive and financially strong. Our strategic spearheads for growth and transformative projects provide us with significant long-term opportunities for value creation and earnings growth.

Preparations for the new world-class pulp mill in Uruguay are progressing towards a potential investment decision. Initial works on the central railway have been started and financing of the railway construction consortium is proceeding but is yet to be finalised. In UPM Biochemicals and in UPM Biofuels our work on preparing growth initiatives continues.

UPM is ready to seize the opportunities offered by bioeconomy. We firmly believe in growing sustainable businesses that offer solutions to global challenges. Our innovations create value and business opportunities for an era in which the world is no longer dependent on fossils.”

Outlook 2019

The global economic growth is estimated to continue in 2019, albeit at a slower pace than in 2018. There are, however, significant uncertainties related to this, including trade negotiations between China and the US, growth in China, the undefined nature of Brexit and political uncertainties in several countries. These issues may have an impact on the global economic growth and on UPM’s product and raw material markets during 2019.

UPM reached record earnings in 2018. UPM’s business performance is expected to continue at a good level in 2019.

In 2019, demand growth is expected to continue for most UPM businesses, albeit at a modest pace. Demand decline is expected to continue for UPM Communication Papers.

In H2 2019, pulp prices globally are expected to be lower than in H1 2019. Paper prices in Europe and North America are expected to be moderately lower. Also input costs are expected to decrease in H2 2019 compared with H1 2019. UPM will continue measures to reduce both variable and fixed costs.

Fair value increases of forest assets are not expected to contribute materially to comparable EBIT in 2019.

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, on 23 July 2019 at 13:15 EET.

Later in the afternoon, 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 – June 2019

International telephone numbers with a pin code 54238946#

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United Kingdom Toll: +44 333 300 08 04
United States Toll: +1 85 585 706 86


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 pages 135–136 of the 2018 Annual Report. Risks and opportunities are discussed on pages 30–31 and risks and risk management are presented on pages 106–109 of the report.


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

UPM, Media Relations
Mon-Fri from 9:00 to 16:00 EET
tel. +358 40 588 3284

We deliver renewable and responsible solutions and innovate for a future beyond fossils across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers and UPM Plywood. We employ around 19,100 people worldwide and our annual sales are approximately EUR 10 billion. Our shares are listed on NASDAQ OMX Helsinki. UPM Biofore - Beyond fossils. www.upm.com

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UPM presents certain 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.