Post on 13-Jul-2020
UPM Q1 RESULTS 2010
Jussi PesonenPresident and CEO
28 April 2010
2 | © UPM
Q1 2010 in brief
• Q1 sales grew by 10% from last year – demand is recovering- delivery volumes increased in all businesses
- sales prices decreased in publication papers, but increased in all other products during Q1
• Operating profit excluding special items EUR 116 million, operating cash flow EUR 209 million
• Uruguay operations were included for the first full quarter and contributed positively to the results
• Raw material markets (e.g. RCP and wood markets) have tightened and availability of fibre is a concern
• The estimated loss due to the Finnish stevedores' strike was about EUR 20 million, partly in Q1 and partly in Q2
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-18%-23%+10%Sales growth (%)
22,840
209
0.15
116
-9
107
14.1
288
2,039
Q1/10
24,039
274
-0.27
-78
-17
-95
6.9
128
1,857
Q1/09
23,213
1,259
0.11
270
-135
135
13.8
1,062
7,719
2009
Net cash generated from operating activities, €m
Personnel at the end of period
Operating profit (loss), excl. special items, €m
EPS excl. special items, €
Sales, €m
% of sales
EBITDA, €m
Special items included in operating profit, net
Operating profit (loss), €m
FINANCIALSKey financials
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FINANCIALSEBITDA development in Q1 2010 vs. Q1 2009Paper weaker, all other businesses improved
0
50
100
150
200
250
300
350
EBITDAQ109
EBITDAQ110
€ million
1286.9%
Pulp
Forest and
timberLabel Other
operations
Paper
28814.1%
Energy
Plywood
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FINANCIALSEBITDA development in Q1 2010 vs. Q1 200910% higher sales on same fixed costs
0
50
100
150
200
250
300
350
EBITDAQ109
EBITDAQ110
€ million
1286.9%
Prices, currency
Wood costs
Energy costs
Otheritems
Fixed costs
28814.1%
Wood inventory write down in Q1 2009
Delivery volumesand inclusion of
Uruguay
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-100
-50
0
50
100
150
200
250
300
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110
FINANCIALS
Operating profit improved, butprofitability remains unsatisfactory
€ million
1165.7%
-78-4.2%
1887.8%
UPM's operating profit excluding special items
2218.8%
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450
550
650
750
850
2006 2007 2008 2009 2010300
400
500
600
700
WFU PIX BHKP
WFU €/ton
Source: FOEX Indexes Ltd., PPI, RISI
400
450
500
550
600
2006 2007 2008 2009 2010
0
50
100
150
200
News 45 g/m² RCP
FINANCIALS
Increasing pulp and RCP prices are squeezing paper makers' margins
WFU
RCP
NewsprintBHKP
Hardwood pulp (BHKP) €/ton Newsprint €/ton RCP (ONP) €/ton
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FINANCIALSCash flow
169
9
160
-49
209
-23
-18
250
288
Q1/10
210
14
196
-78
274
-73
216
131
128
Q1/09
1,045
22
1,023
-236
1,259
-214
532
941
1,062
2009
Asset sales and acquisitions
Cash flow after investing activities
Capital expenditure
Cash flow after capex
Net cash from operating activities
Change in working capital
EBITDA
Cash flow before change in working capital
Finance costs and income taxes
€, million
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3 000
3 500
4 000
4 500
5 000
04 05 06 07 08 09 Q110
5456
0
20
40
60
80
100
120
04 05 06 07 08 09 Q110
Gearing ratiodecreased by 2pp
Net debtdecreased by EUR 161m
% € million
Target: maximum 90%
FINANCIALS Balance sheet strengthened
Liquidity remained at EUR 2.2bnrepayments less than €0.6bn in 2010-11
3 7303 569
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Outlook for 2010 (*
• Gradual recovery in demand to continue in consumer goods and graphic papers. Pick up expected also for construction materials
• Positive development in delivery volumes is expected to continuein most of our businesses
• In paper, sales prices in euro are estimated to be higher duringQ2 2010 and target is to increase prices in all new contracts
• Raw material markets have tightened. Variable costs are expected to increase by about 2% from last year
• Operating profit excluding special items for 2010 is expected toclearly improve from last year
(* See complete wording of the "Outlook" in the Interim Report for Q1 2010
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Summary
• Sales grew by 10%
• Fixed costs flat
• WOC nearly flat
• Balance sheet continued to strengthen
• Demand recovery continues
• Sales prices have bottomed
• Pressure in raw material prices
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UPM assets – good cash flow with a long lifetime
• Strong and versatile energy portfolio providing cost competitiveenergy
• Four modern pulp mills with total capacity of 3.2 million tons, of which 1.1 million tons in Uruguay
• Own forests and plantations provide up to 25 % of fibre
• Modern and cost competitive paper capacity. Changshu mill in the middle of fast growing markets
• Label has a global, modern manufacturing and delivery platform and strong market positions
• Plywood, after restructuring, cost competitive production
• Strong balance sheet and good cash flow
BUSINESS DRIVERS
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-9,0
-7,4
-5,9
-4,3
-2,8
-1,2
0,3
1,9
3,4
5,0
6,6
8,1
9,7
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
BUSINESS DRIVERSEconomic indicators have improved and recovery has started in demand for UPM's products
Paper demand growth (%, trailing 3 month)
Sources: Cepiprint, Cepifine, OECD
Euro zone composite leading indicator
Graphic paper demand growth
Euro zone composite leading indicator
15 | © UPM
8 000
8 500
9 000
9 500
10 000
10 500
11 000
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
1 500
2 000
2 500
3 000
3 500
4 000
4 500
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Source: Cepiprint/fine, PPPC
Graphic papers demand in Europe +3%
Magazine and WFC papers demand in North America +13%
13%
3%
BUSINESS DRIVERSGraphic papers demand
'000 tonnes '000 tonnes
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300
400
500
600
700
800
900
'03 '04 '05 '06 '07 '08 '09 '10
News 45 g/m² SC rg 56 g/m²
LWC off 60 g/m² WFCr 100 g/m²
WFUr 80 g/m²
€/tEurope
400
500
600
700
800
900
1000
1100
1200
1300
'03 '04 '05 '06 '07 '08 '09 '10
News 48,8 g/m² SC 51,8 g/m²
LWC 59,2 g/m² WFCr 88,8 g/m²
WFUr off 74 g/m²
USD/t
400
500
600
700
800
900
1000
1100
1200
1300
'03 '04 '05 '06 '07 '08 '09 1Q
WFU s 80-120 g WFC s 128-157 g
USD/tChinaNorth America
imported
domestic
Source: PPI, RISI
BUSINESS DRIVERSGraphic paper prices
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300
400
500
600
700
800
900
1 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PIX NBSK PIX BHKP
BUSINESS DRIVERSChemical pulp market price
USD/ton
(Northern Bleached Softwood Kraft)
Source: FOEX Indexes Ltd.
(Northern Bleached Hardwood Kraft)
USD 929/t
USD 840/t
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10
11
12
13
14
15
16
17
18
19
20
2004 2005 2006 2007 2008 2009 2010
BUSINESS DRIVERS Wood prices still at a high level
Fibre wood prices in Finland, € / m³
Source: Metla
Birch
Pine
+15%
FINANCIALS
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0
200
400
600
800
1 000
1 200
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-202
6
2027
2028
2029
2030
Committed Facilities Loans
• Liquidity on 31 March 2010 was € 2.2bn- cash € 365 million and unused credit facilities € 1.875 bn
FINANCIALSMaturity profile
€ million
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0
200
400
600
800
1 000
05 06 07 08 09 10e
FINANCIALS Capital expenditure and estimate for 2010
€ million
Depreciation excl. amortization of goodwill
Strategic investments
Operational investments
Estimate
Uruguay and PVO acquisitions
300
760
229
761
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FINANCIALS Q1 EBITDA:Paper weaker, all other businesses improved
-50
0
50
100
150
200
250
300
350
79
120
331
-2 -18
288
€ millionUPMtotal
Energy Pulp Forest and
timber
Paper Label Plywood Other operations
Q1 2010Q1 2009
75
EBITDA by business area Q1 2010 vs. Q1 2009
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50
60
70
80
90
100
110
2007 2008 2009 2010
Publication papers Fine and speciality papers
Sawn timber Plywood
FINANCIALS Deliveries increased in all businesses from last year
Delivery volumes, indexed Q107 = 100 Change in deliveries from last year
-11+88(*Pulp
-30+2Sawn timber
Label
-20+5Publication papers
-30
-6
2009
+29Fine and speciality papers
+5Plywood
Q1/10%
*) acquired Fray Bentos pulp millincluded from Dec 2009
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FINANCIALSEnergy Q1 2010 vs. Q1 2009
• Average sales price for electricity increased by 36%
• external sales was higher
• Due to higher market prices, 29% lower hydropower volume was partly compensated with higher condensing power generation
0
20
40
60
80
100
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
€, million
51
81
37.5%
46.6%
2.4
36%
81
174
Q1/10
2.5
40%
51
136
Q1/09
Average price, change %
Electricity sales, TWh
Operating profit M€excl. special items
Sales, M€
Operating profit excluding special items
25 | © UPM
FINANCIALSPulp Q1 2010 vs. Q1 2009
• Uruguay operations were included in the Pulp business area as of December 2009
• Operating profit improved due to significantly higher average pulp price
• Wood costs were lower
• Comparison period included a wood inventory write-down of € 28 million and a pulp inventory write-down of € 10 million
-100
-80
-60
-40
-20
0
20
40
60
80
100
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
8424.6%
700
84
341
Q1/10
372Pulp deliveries, 1,000 t
-93Operating profit M€excl. special items
139Sales, M€
Q1/09
Associated company Metsä-Botnia
€, million Operating profit excluding special items
-93-66.9%
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FINANCIALSForest and timber Q1 2010 vs. Q1 2009
-60
-40
-20
0
20
40
60
80
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
-8
19
-2.1%
5.6%
1119Fair value change of biological assets
371
14%
19
339
Q1/10
363Sawn timber deliveries, 1,000 m3
-21%Average price of sawn timber, change %
-8Operating profit M€excl. special items
385Sales, M€
Q1/09
• Sawn timber average sales price increased by 14%
• Increase in the fair value of biological assets net of wood harvested was € 19 million
Fair value change of biological assets
€, million Operating profit excluding special items
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FINANCIALSPaper Q1 2010 vs. Q1 2009
-80
-60
-40
-20
0
20
40
60
80
100
120
140
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
37
-61
2.7%
-4.4%
• Average paper price decreased by 10%
• Cost of fibre increased
• Delivery volumes increased 13%
• delivery growth especially in Asia, in North America and speciality papers
2,301
-10%
-61
1,401
Q1/10
2,028Paper deliveries, 1,000 t
4%Average price, change %
37Operating profit M€excl. special items
1,367Sales, M€
Q1/09
€, million Operating profit excluding special items
28 | © UPM
• Operating profit increased due lower raw material costs and higher delivery volumes
• Delivery volumes increased in all regions, especially in Asia and Eastern Europe
• The average sales price for label materials in local currencies decreased marginally from last year but increased from Q4
FINANCIALSLabel Q1 2010 vs. Q1 2009
-10
0
10
20
30
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
-3
23
-1.3%
8.8%
-323Operating profit M€excl. special items
260
Q1/10
223Sales, M€
Q1/09
€, million Operating profit excluding special items
29 | © UPM
FINANCIALSPlywood Q1 2010 vs. Q1 2009
• Operating loss decreased due to lower production costs
• Sales price was lower
• The comparison period included a wood inventory write-down of € 15 million
-30
-20
-10
0
10
20
30
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
-28
-7
-37.3%
-9.2%
140
-7
76
Q1/10
133Plywood deliveries, 1,000 m³
-28Operating profit M€excl. special items
75Sales, M€
Q1/09
€, million Operating profit excluding special items
30 | © UPM