UPM Interim Report Q1 2023: Solid Q1 result underpinned by strong margins, two transformative projects completed

Stock Exchange Release 25.4.2023 9:50 EEST

UPM-Kymmene Corporation        Stock Exchange Release (Interim Report)        25 April 2023 at 09:50 EEST

UPM Interim Report Q1 2023:
Solid Q1 result underpinned by strong margins, two transformative projects completed

Q1 2023 highlights

  • Sales increased by 11% to EUR 2,787 million (2,507 million in Q1 2022)
  • Comparable EBIT grew by 29% to EUR 356 million, 12.8% of sales (277 million, 11.0%)
  • Delivery volumes were impacted by destocking in various product value chains
  • Successful margin management
  • Operating cash flow was EUR 714 million (12 million), supported by cash inflow from energy hedges
  • Net debt increased to EUR 2,167 million (837 million) and the net debt to EBITDA ratio was 0.82 (0.46)
  • Cash funds and unused committed credit facilities totalled EUR 6.7 billion at the end of Q1 2023
  • UPM Paso de los Toros pulp mill in Uruguay started up production on 15 April
  • The OL3 nuclear power plant unit began regular electricity production on 16 April and Teollisuuden Voima Oyj (TVO) submitted to the OL3 plant supplier the Provisional Takeover Certificate on 20 April
  • UPM finalised its full exit from Russia
  • UPM announced a plan to permanently close paper machine 6 at UPM Schongau in Germany and to accelerate the earlier announced stop of production at the Steyrermühl mill in Austria by the end of Q2 2023

Key figures

Sales, EURm        2,787        2,507        3,231        11,720
Comparable EBITDA, EURm        477        377        759        2,536
% of sales        17.1        15.0        23.5        21.6
Operating profit, EURm        318        183        675        1,974
Comparable EBIT, EURm        356        277        653        2,096
% of sales        12.8        11.0        20.2        17.9
Profit before tax, EURm        239        179        638        1,944
Comparable profit before tax, EURm        344        273        616        2,066
Profit for the period, EURm        183        139        503        1,556
Comparable profit for the period, EURm        281        232        489        1,679
Earnings per share (EPS), EUR        0.33        0.25        0.93        2.86
Comparable EPS, EUR        0.51        0.42        0.91        3.09
Return on equity (ROE), %        5.7        5.0        16.0        13.0
Comparable ROE, %        8.7        8.4        15.5        14.0
Return on capital employed (ROCE), %        6.0        5.8        15.0        12.8
Comparable ROCE, %        8.4        8.5        14.5        13.6
Operating cash flow, EURm        714        12        1,576        508
Operating cash flow per share, EUR        1.34        0.02        2.95        0.95
Equity per share at the end of period, EUR        23.42        20.11        23.44        23.44
Capital employed at the end of period, EURm        16,478        13,840        17,913        17,913
Net debt at the end of period, EURm        2,167        837        2,374        2,374
Net debt to EBITDA (last 12 months)        0.82        0.46        0.94        0.94
Personnel at the end of period        16,985        16,843        17,236        17,236

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

“We delivered our second-best Q1 result in more than 20 years, even though it was held back by a short-term lack of volumes. After a year of rapid inflation and scarcity of goods, 2023 began with intense destocking in most product value chains. We succeeded in managing margins and adapting our operations to the situation. Sales increased by 11% and comparable EBIT grew by 29% over last year. Our operating cash flow was impressive at EUR 714 million.

What makes me particularly excited is that we have just reached two strategic milestones. Our transformative growth projects in UPM Fibres and UPM Energy have been completed: The UPM Paso de los Toros pulp mill in Uruguay is ramping up and the OL3 nuclear power plant unit has started regular commercial electricity production. Both investments will contribute to UPM’s results and future opportunities for decades to come, and I would like to thank all UPMers who have contributed to these major projects over the years.

Looking at our Q1 business performance, market shipments in most products were substantially below the long-term averages due to destocking in the value chains. UPM Communication Papers, UPM Energy and UPM Plywood achieved good results in the low-volume environment. UPM Fibres continued to deliver satisfactory results and the business was getting ready to start up UPM Paso de los Toros. UPM Raflatac and UPM Specialty Papers managed to maintain healthy unit margins, but the results in both businesses leave room for improvement as delivery volumes recover.

Despite the short-term turbulence, the long-term growth prospects remain unchanged and attractive. We continue to focus on managing margins. We expect the impact of destocking to phase out in the coming months. Moreover, many variable costs have already passed their peak but the benefit to UPM businesses is yet to materialise in our results.

In UPM Communication Papers, we decided to stop production at UPM Steyrermühl Austria by the end of Q2, six months earlier than planned. Paper machine 6 at UPM Schongau, Germany, is planned to be closed permanently by the end of Q2.

We continue to build our attractive growth platforms for various biomaterials businesses:

UPM Paso de los Toros will supply sustainable products to meet global consumer demand and grow our pulp business by over 50%. The cash cost level of approximately USD 280 per delivered tonne of pulp makes it one of the most competitive pulp mills in the world. The COVID-19 pandemic and the global economic circumstances brought unforeseen challenges to the project, but UPMers managed them with great professionalism, which makes me very proud of the entire project team. The total investment of USD 3.47 billion will create wellbeing in the surrounding communities and benefit the whole Uruguayan economy. For UPM, the plantation-based business platform offers further growth opportunities in various biomaterials in the long term.

The OL3 nuclear power plant unit increases UPM Energy’s CO2-free electricity output by nearly 50%. It is an excellent example of how we are living up to our ambitious purpose of creating a future beyond fossils. OL3 promotes the electrification of society, increases Finnish electricity self-sufficiency and provides a much-needed response to the energy crisis in Finland. In the long term, our competitive and agile energy business platform will open up growth opportunities for UPM in the green transition, e.g. in synthetic fuels and materials.

Customers’ keen interest in the biochemical products of our new biorefinery currently under construction in Leuna, Germany, confirms the business case and growth strategy to replace fossil-based materials with renewable alternatives in numerous end uses. Detailed commercial and basic engineering studies of the potential biofuels refinery in Rotterdam continue at an intense pace.

With UPM Paso de los Toros and OL3 now in production and a portfolio of ground-breaking projects under way, I look to the future with confidence and excitement.”

Outlook for 2023

UPM reached record earnings in 2022, and 2023 is expected to be another year of strong financial performance. UPM’s comparable EBIT is expected to increase in H1 2023 from H1 2022.

In 2023, UPM’s delivery volumes are expected to benefit from the ramp up of the UPM Paso de los Toros pulp mill and the OL3 nuclear power plant unit. In H1 2023, however, demand for many UPM products is expected to be held back by destocking in various product value chains. The opening of the Chinese economy from the COVID lockdowns and easing inflation in other key economies represent potential for increasing demand as the year progresses.

Year 2023 is starting with high-cost level for many inputs, while the lower demand is exerting pressure on product prices. However, several input costs have also progressed past their peak. UPM will continue to manage margins with product pricing, by optimising its product and market mix and by taking measures to improve variable and fixed cost efficiency.

There are significant uncertainties, both positive and negative, in the outlook for 2023, related to the European, Chinese and global economy, Russia’s war in Ukraine, the remaining effects of the pandemic, energy prices and related regulation in Europe, and the ramp-up of the OL3 power plant unit.

Invitation to UPM’s webcast and press conference on Q1 2023 Interim Report

A webcast and a conference call for analysts and investors in English begins at 13:15 EEST. The interim report will be presented by the President and CEO Jussi Pesonen and CFO Tapio Korpeinen. Participants can view the webcast online through this link, but participants who wish to ask questions from the management must register for the teleconference.

To ask questions, join the teleconference by registering here. After the registration you will be provided with phone numbers and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to enter the queue.

The webcast will be available at www.upm.com for 12 months after the call.

Later in the afternoon, at 14:45 EEST, President and CEO Jussi Pesonen will present the interim report in a press conference held in Finnish both at the Group head office and online. Those wishing to attend this event, please contact the UPM media desk.


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 173–174 of the Annual Report 2022. Risks and opportunities are discussed on pages 32–33, and risks and risk management are presented on pages 132–137.


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

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

We deliver renewable and responsible solutions and innovate for a future beyond fossils across six business areas: UPM Fibres, 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 17,200 people worldwide and our annual sales are approximately EUR 11.7 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com

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