UPM Interim Report Q1 2021: Market turn and efficiency improvement boost UPM’s earnings – growth projects progress as planned

Stock Exchange Release 27.4.2021 9:45 EEST

UPM-Kymmene Corporation        Stock Exchange Release (Interim Report)        27 April 2021 at 09:45 EET

UPM Interim Report Q1 2021:
Market turn and efficiency improvement boost UPM’s earnings – growth projects progress as planned

Q1 2021 highlights

  • Sales decreased by 2% to EUR 2,234 million (2,287 million in Q1 2020) mainly due to lower prices of graphic papers and unfavourable changes in currencies
  • Comparable EBIT was EUR 279 million, 12.5% of sales (279 million, 12.2%), in line with last year
  • Pulp demand continued to be good and pulp prices increased rapidly. Strong markets continued for labelling materials, specialty papers and energy
  • Following the timely actions taken in H2 2020 costs were competitive and asset utilisation good
  • Operating cash flow increased to EUR 217 million (137 million)
  • Strong financial position continues. Net debt was EUR 83 million (-405) and cash funds and unused committed credit facilities totalled EUR 3.2 billion at the end of Q1 2021
  • UPM issued a EUR 500 million Green Bond under the EMTN programme in March
  • Transformative growth projects proceed on budget and on schedule
  • UPM started the basic engineering phase of a next-generation biofuels refinery in January
  • UPM joined The Climate Pledge in February, committed to reach the targets of the Paris Agreement 10 years in advance

Key figures

Sales, EURm2,234  2,287  2,188  8,580  
Comparable EBITDA, EURm389  398  392  1,442  
% of sales17.4  17.4  17.9  16.8  
Operating profit, EURm279  243  253  761  
Comparable EBIT, EURm279  279  252  948  
% of sales12.5  12.2  11.5  11.1  
Profit before tax, EURm272  240  250  737  
Comparable profit before tax, EURm272  276  248  924  
Profit for the period, EURm227  192  190  568  
Comparable profit for the period, EURm228  231  191  737  
Earnings per share (EPS), EUR0.42  0.36  0.35  1.05  
Comparable EPS, EUR0.42  0.43  0.35  1.37  
Return on equity (ROE), %9.7  7.7  8.0  5.8  
Comparable ROE, %9.7  9.3  8.0  7.5  
Return on capital employed (ROCE), %9.5  8.9  9.1  6.7  
Comparable ROCE, %9.5  10.2  9.1  8.3  
Operating cash flow, EURm217  137  347  1,005  
Operating cash flow per share, EUR0.41  0.26  0.65  1.89  
Equity per share at the end of period, EUR17.06  17.90  17.53  17.53  
Capital employed at the end of period, EURm11,933  11,009  11,555  11,555  
Net debt at the end of period, EURm83  -405  56  56  
Net debt to EBITDA (last 12 months)0.06  -0.23  0.04  0.04  
Personnel at the end of period17,670  18,573  18,014  18,014  

Jussi Pesonen, President and CEO, comments on the Q1 results:

“UPM entered the year well prepared for the turn in the markets, which is also evident in our first quarter results. We took timely actions last year, and now that the world economy is recovering, there is a good momentum going forward.

The year began with good demand for almost all UPM products. Pulp prices increased rapidly, while UPM Raflatac, UPM Specialty Papers and UPM Energy continued to perform strongly. In addition, UPM Communications Papers achieved satisfactory results in the difficult market environment. Our earnings recovered to pre-pandemic levels, and our transformative growth projects continued on schedule and on budget. All in all, a good start to the year.

Our sales decreased by 2% to EUR 2,234 million, and comparable EBIT reached EUR 279 million, in line with the corresponding quarter of last year and higher than the three preceding quarters. Operating cash flow increased to EUR 217 million. Our financial position remains strong with a net debt of EUR 83 million and cash funds and unused committed credit facilities totalling EUR 3.2 billion at the end of Q1 2021.

The biggest improvement in earnings came from UPM Biorefining. Demand for pulp, timber and biofuels was good and pulp prices increased faster than expected. At the same time, strong markets continued for labelling materials and specialty papers. Demand trends in consumer behaviour, e-commerce and retail, accelerated by the pandemic, carried UPM Raflatac and UPM Specialty Papers to excellent results again. For UPM Raflatac, the quarter was its best-ever.

Demand and pricing for communication papers decreased from the comparison periods, as expected. Despite difficult market conditions UPM Communication Papers achieved a clearly positive comparable EBIT due to efficient operations, satisfactory asset utilisation rates and commercial success. This would not have been possible without the timely measures taken last year.

Profitability of UPM Energy continued on an excellent level. Electricity sales prices were clearly higher than on comparison periods, and UPM succeeded in optimising the use of its assets in volatile markets. Hydropower generation decreased but was on a good level.

UPM Plywood delivered steady results. Demand continued to be good in construction end uses, and started to improve in industrial end uses, such as panel trading and vehicle flooring.

In the recovering world economy, China is leading the development. The pick-up in business activity is driving demand for many of our products, but it is simultaneously pushing commodity and raw material prices higher. We are aiming to capture opportunities in the recovering markets by efficient margin management and optimising our product and market mix. At the same time, we will continue to take measures to offset cost pressures and to maintain cost efficiency in all our businesses and functions. I believe UPM’s operating model will again help us in steering the businesses in the rapidly changing market circumstances.

We are in a very exciting and intensive phase in UPM’s transformation. I am proud of both of our strategic growth projects, which proceed on schedule and on budget in these exceptional times. In Uruguay, we have now 4,000 workers on our construction sites in Paso de los Toros and Montevideo, and the number will rise to 6,000 later this year. UPM has implemented strict COVID-19 prevention measures to protect workers and to ensure the progress of this strategic project. In Leuna, Germany our biochemicals investment is progressing at full speed in terms of construction, business preparations and concrete customer cases.

In January we announced the start of the basic engineering phase of a potential next-generation biorefinery with an annual capacity of 500,000 tonnes of renewable fuels. As primary locations, we will review Kotka, Finland and Rotterdam, the Netherlands. This basic engineering phase is estimated to last at least 12 months before our standard procedure of analysing and preparing an investment decision can be initiated.

Our ambition is high when we develop business opportunities related to mitigating climate change. We strive to innovate climate-positive products that allow our customers and end-users to make more sustainable choices. Our growth plans in biochemicals and biofuels are prominent examples of this, taking place right now. Furthermore, we have ambitious long-term climate targets, including significant reduction of our CO2 emissions. During the first quarter, we joined the Climate Pledge, aiming to reach the Paris Agreement targets 10 years in advance. We have also committed to the UN Global Compact Business Ambition for 1.5°C and science-based measures to mitigate climate change.

We are continuing to demonstrate our aim for sustainable growth and long-term value creation in our actions. Our purpose is to create a future beyond fossils."

Outlook for 2021

The global economy is expected to start recovering in 2021 from the deep downturn experienced in 2020. World regions will progress at different pace, and China is leading this development. Demand for most UPM products is influenced by overall economic activity and hence, depends on the shape and rate of the economic recovery.

The COVID-19 pandemic continues to cause uncertainty in 2021. In 2020, lockdowns had a significant negative impact on graphic paper demand but supported the strong demand for self-adhesive labelling materials and specialty papers. Opening of the economies is likely to allow for some normalisation of these demand impacts.

Pulp demand has continued to be good and pulp prices have increased rapidly. At the same time, strong markets have continued for labelling materials, specialty papers and energy. Demand and pricing for communication papers have materialised as expected, decreasing from the comparison periods.

With improving global economy, many variable cost items are expected to increase in 2021. UPM will continue to manage margins with product pricing, optimising its product and market mix, efficient use of assets as well as by taking measures to improve variable and fixed cost efficiency.

UPM’s comparable EBIT is expected to increase both in H1 2021 compared with H1 2020, and in the full year 2021 compared with 2020.

Invitation to webcast and press conference on Q1 2021 Interim Report

A webcast and a conference call for analysts and investors in English language begins at 13:15 EET. UPM’s financial results will be presented by the President and CEO Jussi Pesonen and CFO Tapio Korpeinen. All participants can view the webcast online at www.upm.com or through this link, but participants who wish to ask questions must attend the conference call by dialling a number in the list below:

Conference call title: UPM Interim Report for January–March 2021
International telephone numbers:

Argentina Toll: +54 1152526536
Australia Toll: +61 284058549
Austria Toll: +43 19287907
Belgium Toll: +32 24035814
Brazil Toll: +55 1133517266
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Canada Toll: +1 4162164189
Chile Toll: +56 226188227
China Toll: +86 4008983300
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Cyprus Toll: +357 26030115
Czech Republic Toll: +420 225439714
Denmark Toll: +45 35445577
Estonia Toll: +372 6868838
Finland Toll: +358981710310
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India Toll: +91 2271279610
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Ireland Toll: +353 15251892
Israel Toll: +972 37207679
Italy Toll: +39 0236013821
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PIN code: 15323164#

We recommend that participants dial in 5-10 minutes prior to ensure a timely start of the webcast. The webcast will be available at www.upm.com for 12 months after the call.

Later in the afternoon, at 14:30 EET, CEO Jussi Pesonen will present the Q1 results in a press conference held in the Finnish language both at the Biofore House and online. Due to the Covid-19 pandemic, participation to the Biofore House event is restricted to members of the media only. Others are asked to follow the presentation online. To register to the live or online event, visit this link. Only the registered will receive the link to the online press conference.


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 160–161 of the Annual Report 2020. Risks and opportunities are discussed on pages 36–37, and risks and risk management are presented on pages 129–133.


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

UPM, Media Relations
Mon-Fri 9:00-16:00 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. As the industry leader in responsibility we are committed to the UN Business Ambition for 1.5°C and the science-based targets to mitigate climate change. We employ 18,000 people worldwide and our annual sales are approximately EUR 8.6 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com

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