UPM Interim Report Q3 2021: UPM delivers a record quarter in an exceptionally volatile global environment

Stock Exchange Release 26.10.2021 9:45 EEST

UPM-Kymmene Corporation        Stock Exchange Release (Interim Report) 26 October 2021 at 09:45 EEST

UPM Interim Report Q3 2021:
UPM delivers a record quarter in an exceptionally volatile global environment

Q3 2021 highlights

  • Sales increased by 24% to EUR 2,523 million (2,028 million in Q3 2020)
  • Comparable EBIT increased by 98% to EUR 424 million, 16.8% of sales (215 million, 10.6%)
  • Operating cash flow was EUR 318 million (365 million)
  • Demand for UPM’s products was good, and overall, price increases more than offset the rapid rise in input costs
  • UPM completed the sale of the UPM Shotton newsprint mill in the UK
  • The global sustainability ratings provider EcoVadis recognised UPM on the highest possible Platinum level for its responsible performance in 2021
  • UPM was recognised as one of the world’s 37 most sustainable companies by the UN Global Compact

Q1–Q3 2021 highlights

  • Sales increased by 12% to EUR 7,141 million (6,392 million in Q1–Q3 2020)
  • Comparable EBIT increased by 45% to EUR 1,010 million (697 million), and was 14.1% (10.9%) of sales
  • Operating cash flow was EUR 844 million (659 million)
  • UPM's transformative growth projects made good progress
  • Net debt increased to EUR 667 million (89 million) and net debt to EBITDA ratio was 0.38 (0.06)
  • Cash funds and unused committed credit facilities totalled EUR 2.5 billion at the end of September
  • 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, EURm2,523  2,028  2,384  7,141  6,392  8,580  
Comparable EBITDA, EURm535  331  426  1,351  1,050  1,442  
% of sales21.2  16.3  17.9  18.9  16.4  16.8  
Operating profit, EURm564  117  304  1,147  508  761  
Comparable EBIT, EURm424  215  307  1,010  697  948  
% of sales16.8  10.6  12.9  14.1  10.9  11.1  
Profit before tax, EURm558  109  298  1,128  487  737  
Comparable profit before tax, EURm418  207  301  991  676  924  
Profit for the period, EURm497  83  243  968  378  568  
Comparable profit for the period, EURm359  158  246  832  546  737  
Earnings per share (EPS), EUR0.92  0.15  0.45  1.78  0.70  1.05  
Comparable EPS, EUR0.66  0.29  0.45  1.53  1.01  1.37  
Return on equity (ROE), %19.9  3.5  10.3  12.9  5.1  5.8  
Comparable ROE, %14.3  6.7  10.4  11.1  7.4  7.5  
Return on capital employed (ROCE), %17.9  4.3  10.1  12.5  6.2  6.7  
Comparable ROCE, %13.4  7.9  10.2  11.0  8.5  8.3  
Operating cash flow, EURm318  365  308  844  659  1,005  
Operating cash flow per share, EUR0.60  0.69  0.58  1.58  1.23  1.89  
Equity per share at the end of period, EUR19.08  17.54  17.62  19.08  17.54  17.53  
Capital employed at the end of period, EURm13,039  10,721  12,226  13,039  10,721  11,555  
Net debt at the end of period, EURm667  89  750  667  89  56  
Net debt to EBITDA (last 12 months)0.38  0.06  0.49  0.38  0.06  0.04  
Personnel at the end of period17,085  18,349  17,874  17,085  18,349  18,014  


Jussi Pesonen, President and CEO, comments on the Q3 results:

“The third quarter of the year was the best-ever quarter for UPM. At the same time, we have been able to make good progress with our transformative investments. These achievements are remarkable in an exceptionally volatile and uncertain global business environment, and I want to thank all UPMers for the resilience and determination they have shown.

The demand for our products was good, particularly in Europe and North America, and sales prices increased in all our businesses. However, variable costs rose rapidly across the board as well. Most notably the energy markets have changed dramatically in a short period of time. Our operational efficiency was excellent despite the challenges in logistics and global supply chains.

Q3 sales increased by 24% to EUR 2,523 million. Comparable EBIT was up by 98% rising to EUR 424 million from the lockdown affected Q3 of last year. Comparable EBIT margin reached 16.8%. Operating cash flow was EUR 318 million and our financial position remains very strong. Net debt at the end of September was EUR 667 million, 0.38 times EBITDA, and our cash funds and unused committed credit facilities totalled EUR 2.5 billion.

UPM Biorefining reached record quarterly earnings thanks to significantly higher pulp and timber sales prices and excellent operational efficiency. The pulp market continued to be strong in Europe but softened in Asia. Demand for advanced renewable diesel and naphtha was also strong, and our Lappeenranta biorefinery restarted production in early August after the fire related repairs.

UPM Raflatac continued to be one of our star performers. Demand growth was consistently strong across most markets and end-uses. Input costs rose rapidly during the quarter but were mitigated by successful margin management.

The market situation for UPM Specialty Papers was twofold. On the one hand, demand for release, label and packaging papers remained strong in all markets and sales prices increased significantly. On the other hand, fine paper demand in Asia slowed down and prices decreased. High input costs and the exceptional energy market situation in China affected the results.

Despite good market demand in Europe and the implementation of price increases, UPM Communication Papers was loss-making in the quarter. On top of the anticipated cost increases in pulp, recycled fibre and logistics, the emerging energy crisis in Europe resulted in unforeseen cost increases despite hedging. The sale of UPM Shotton newsprint mill was concluded at the end of the quarter.

UPM Energy delivered excellent earnings. The business benefitted from significantly higher electricity sales prices and it successfully implemented optimisation and value creation measures for the volatile markets.

UPM Plywood also achieved record quarterly earnings. Market demand for both spruce and birch plywood continues to be strong and price increases have been successful. The business also made good progress in operational efficiency, reaching higher production volume than a year ago.

In Uruguay, we have now reached peak activity with more than 6,000 workers on our construction sites. The investment project is progressing intensively in all main areas. In Leuna, Germany, our biochemicals investment is making progress both at the construction site and in business preparation. The pandemic and global logistics bottlenecks pose challenges to large projects, and we continue implementing mitigating actions to ensure timely progress.

The commercialisation of the next generation biochemicals is taking significant steps forward. We are especially excited about our cooperation with Coca-Cola Company. UPM’s bioMEG from the Leuna biorefinery will enable wood-based, recyclable PET bottles. In addition, we launched UPM BioMotion™ renewable functional fillers to significantly reduce CO₂ footprint and weight of rubber and plastics applications in a variety of end-uses.

On the eve of UN climate change conference COP26, we underline the importance of renewable solutions. Undisputedly the most effective way to mitigate climate change is reducing the use of fossil-based raw materials and energy radically. UPM offers alternatives to fossil-based materials and creates a future beyond fossils, enabling our customers and consumers to make sustainable choices. Our climate action is based on significant emissions reductions, managing forests sustainably and innovating climate-positive products. These actions support the UN Business Ambition for 1.5 degrees to which we are committed.”

Outlook for 2021

The global economy has started recovering in 2021 from the deep downturn experienced in 2020. World regions will progress at different pace. China has led this development but has recently slowed down to some extent. 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.

Sales prices for many UPM products are expected to increase in H2 2021 from H1 2021, including graphic paper prices in Europe. Pulp sales prices increased rapidly in H1 2021 and are expected to be higher on average in H2 2021 than in H1 2021.

With improving global economy, many variable cost items are expected to increase in 2021. During H2 2021 the tight energy market situation is expected to cause increased costs both directly and indirectly. 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 H2 2021 compared with H1 2021 and increase clearly in the full year 2021 compared with 2020.

Invitation to UPM’s webcast and press conference on Q3 2021 interim report

A webcast and a conference call for analysts and investors in English language begins at 13:15 EEST. 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–September 2021
International telephone numbers:

Argentina Toll: +54 1152526536
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PIN code: 16781203#

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 14:45 EEST, CEO Jussi Pesonen will present the Q3 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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