Photo: Jussi Pesonen, President and CEO
Q2 2014 compared with Q2 2013
• Earnings per share excluding special items were EUR 0.26 (0.20), and reported EUR 0.25 (0.22)
• Operating profit excluding special items increased to EUR 186 million, 7.6% of sales (138 million, 5.5% of sales), due to the successful profit improvement programme
• EBITDA was EUR 298 million, 12.2% of sales (258 million, 10.2% of sales)
• The Lappeenranta renewable diesel refinery started its testing and commissioning process; the UPM Fray Bentos pulp mill received an increased production permit
• 94% of the targeted annualised EUR 200 million cost savings achieved in Q2 2014
Q1–Q2 2014 compared with Q1–Q2 2013
• Earnings per share excluding special items were EUR 0.53 (0.38), and reported EUR 0.61 (0.31)
• Operating profit excluding special items increased to EUR 382 million, 7.8% of sales (282 million, 5.6% of sales), due to the successful profit improvement programme
• EBITDA was EUR 611 million, 12.4% of sales (542 million, 10.9% of sales)
• Growth projects progressed in UPM Biorefining, UPM Paper Asia and UPM Raflatac
• Strong operating cash flow at EUR 479 million (187 million), net debt decreased to EUR 2,925 million
Jussi Pesonen, President and CEO comments on the result:
has performed significantly better in the first half of 2014 than in the same period last year. Compared to 2013, our second quarter operating profit improved by 35%. The profit improvement programme, announced a year ago, is ahead of schedule and was evident in our results. With improved profitability, our cash flow was strong and the balance sheet was strengthened further which continues to support our capacity to pay a good dividend. Finally, I am pleased that all our growth projects made solid progress during the quarter.
Operating profit excluding special items increased to EUR 186 million (138 million). Operating cash flow continued to be strong at EUR 215 million (84 million), and net debt decreased to EUR 2,925 million (3,524 million).
UPM Paper ENA (Europe and North America), UPM Paper Asia and UPM Plywood all succeeded in their efforts to improve profitability. Most of the improvement stems from reduced variable and fixed costs. Furthermore, UPM Paper Asia and UPM Plywood benefited from higher delivery volumes, and UPM Plywood also profited from increased prices.
In UPM Energy, thanks to successful hedging and optimal utilisation of hydropower assets, profitability remained stable despite lower market prices.
UPM Biorefining and UPM Raflatac
did not reach their full potential this quarter. In Pulp business, which makes up most of the UPM Biorefining results, profitability was negatively impacted by maintenance shut-downs and prolonged start-up at Kaukas pulp mill
in addition to decreased hardwood pulp prices. UPM Raflatac’s results suffered from temporary operational issues.
As for our strategic growth projects, we are well on track.
Biofuels opens up a new horizon for our growth prospects. The Lappeenranta biorefinery, the first of its kind in the world, will start producing clean, technologically advanced renewable diesel. The construction has now been completed and we have started the testing and commissioning process. The sales agreement with NEOT (North European Oil Trade) was signed in June, and the refinery is expected to start commercial production during autumn.
In Pulp, we made good progress in achieving the targeted 10% production capacity increase. The modernised fibre line in Pietarsaari came on stream. At the Kymi mill
, construction work on the extension is on schedule. The production permitting process in Uruguay was completed and UPM Fray Bentos
received a production permit for a further 100,000 tonnes in June, allowing an annual production of 1.3 million tonnes.
Our growth investments in emerging markets were also proceeding as planned. In UPM Changshu
, China, the investment in woodfree speciality grades and labelling materials, as well as UPM Raflatac’s expansion to the self-adhesive labels factory on the same site, got off to a good start. In Nowa Wies, Poland, the preparations for UPM Raflatac’s expansion in filmic labelstock continued.
With these projects we are on our way to top-line growth and an additional EUR 200 million EBITDA in the coming two years,” said Pesonen.
Outlook for 2014
Growth in the European economy is expected to be modest in 2014, but to improve over last year. In the US, growth is expected to remain stable at a moderate level, whereas solid 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 slight improvement in the European economy is likely to moderate the negative demand development seen in the European graphic paper market over the past two years and stimulate European demand for wood products. The current hydrological situation in Finland is slightly above the long term average level, and the forward electricity prices in Finland for H2 2014 are lower than the realised market prices in H2 2013.
UPM’s business outlook is broadly stable.