UPM RESULTS Q4 2014Q4 2014 –strong earnings momentum and record strong balance sheet EUR million...
Transcript of UPM RESULTS Q4 2014Q4 2014 –strong earnings momentum and record strong balance sheet EUR million...
Jussi Pesonen
President and CEO
3 February 2015
UPM RESULTS Q4 2014
| © UPM
2014 – a year of progress
• Operating profit excluding special items increased by 24%
due to the successful EUR 200m profit improvement programme
• A new EUR 150m profit improvement programme for 2015 launched
• Excellent operating cash flow, EUR 2.33 per share
• Balance sheet at the end of 2014 stronger than ever in UPM’s history
• Growth projects progressed – the world’s first wood-based
renewable diesel biorefinery started up in January 2015
• Board proposes increased dividend of
EUR 0.70 per share (+17%)
2
| © UPM
Q4 2014 – strong earnings momentum and
record strong balance sheet
EUR million Q4
2014
Q4
2013
Q3
2014
Sales 2,531 2,588 2,415
EBITDA 330 302 346
% of sales 13.0 11.7 14.3
Operating profit (* 230 207 235
Profit before tax (* 216 188 213
Earnings per share, EUR (* 0.32 0.27 0.32
ROE, % (* 9.2 7.5 9.1
Operating cash flow 462 262 300
Net debt 2,401 3,040 2,726
Gearing, % 32 41 36
3
(* excluding special items
2014 2013 Change
9,868 10,054 -2%
1,287 1,155 +132
13.0 11.5 +1.5pp
847 683 +164
774 610 +164
1.17 0.91 +0.26
8.3 6.4 +1.9pp
1,241 735 +506
2,401 3,040 -639
32 41 -9pp
| © UPM
0
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EBITDA
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EBITDA
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EBITDA in 2014 vs. 2013
Raflatac
Paper
AsiaOther
operations
and
eliminations
Energy
Biorefining
Paper
ENA Plywood
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EBITDA
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EBITDA
2014
EUR million
Prices,
currencies
Variable
costs
Fixed
costs
Deliveries
Significant cost savings achieved
Pulp and paper prices had
a negative impact EUR million
Significant improvement in UPM Paper ENA,
UPM Paper Asia and UPM Plywood, UPM
Biorefining lower
4
Elimin.
1,15511.5%
1,28713.0% 1,155
11.5%
1,28713.0%
| © UPM
Operating profit *) by business area
5
0
2,5
5
7,5
10
12,5
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10
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Q3 1
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Q2
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Q3 1
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50
75
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Q1 1
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Q2 1
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Q3 1
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Q1 1
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Q2 1
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Q3 1
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Q4 1
4
-4
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4
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12
16
-5
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5
10
15
20
Q3 1
2
Q4 1
2
Q1 1
3
Q2 1
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Q3 1
3
Q4 1
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Q1 1
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Q2 1
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Q3 1
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Q4 1
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EURm % of salesUPM Paper Asia EURm % of salesUPM Paper ENA EURm % of salesUPM Plywood
EURm % of salesUPM RaflatacEURm % of salesUPM EnergyEURm % of salesUPM Biorefining
*) excluding special items
| © UPM
Four business areas achieved their long-term
return targets in 2014
6
0
2
4
6
8
10
12
14
16
18
20
2013 2014
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2
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8
10
12
14
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18
20
2013 20140
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2013 2014
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6
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20
2013 2014
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2013 2014
ROCE %ROCE % (* ROCE %ROCE % CF/CE % ROCE %
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
UPM
Raflatac
UPM
EnergyUPM
Biorefining
• With the current business portfolio, achieving BA targets simultaneously would
result in Group EBIT margin of approx. 10% and Group ROCE of approx. 9%
• In 2014, UPM’s EBIT margin was 8.6% and ROCE 7.5%, excl. special items
(* shareholdings in UPM Energy valued at fair value
| © UPM
Excellent cash flow
7
0
200
400
600
800
1 000
1 200
1 400
Q10
8
Q30
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Q10
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Q30
9
Q11
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Q31
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Q31
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Q11
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Q31
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Q11
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Q31
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Q11
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Q31
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Operating cash flow
Cash flow
after investing
activities
EUR million Cash flow, trailing 12 months
• Q4 2014 operating cash
flow was EUR 462m
(262m)
• In 2014 operating cash flow
was EUR 1,241m (735m)
| © UPM
Net debt at record-low level
8
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
Net debt, EUR millionNet debt / EBITDA(trailing 12 months)
Net debt
Net debt / EBITDA
1.9
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
20
30
40
50
60
70
80
90
Net debt, EUR million Gearing %
Net debt
Gearing
32
Liquidity was EUR 1.6bn at the end of 2014
Repayments total EUR 0.4bn in 2015
| © UPM
Group profitability and targets
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Operating profit excl. special items
ROEexcl. special items
Net Debt
Gearing
Max gearing
Min target
EURm %%% of sales Operating profit ROE Gearing
| © UPM
0,00
0,10
0,20
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0,80
2008 2009 2010 2011 2012 2013 2014
New simplified dividend policy,
the Board proposes increased dividend
EUR per
share
0.40
0.45
0.55
10
Dividend policy
• UPM aims to pay an attractive
dividend, 30-40% of operating
cash flow per share
Board’s dividend proposal
for 2014
• EUR 0.70 (0.60) per share
• 30% of 2014 operating cash
flow per share
0.60 0.60 0.60
Dividend
0.70
| © UPM
Outlook for 2015
• The improved profitability achieved in 2014 is expected to continue in 2015, and we have prospects to improve further.
• Our profitability is underpinned by the EUR 150 million profit improvement programme, as well as the first positive impacts from the company’s growth projects.
• Profitability is affected by lower publication paper prices and lower electricity sales prices in the beginning of the year. The current weakened euro and lower oil price are supportive for the company’s earnings.
| © UPM11
| © UPM
Profit improvement programme targeting
EUR 150m of fixed and variable cost savings
0
50
100
150
200
Q314 Q414 Q115 Q215 Q315 Q415 Q116
12
EUR million
EUR 95m of
other fixed and
variable cost
savings
Full annualised EUR 150m impact of the programme is expected
by the end of 2015, as compared with the Q3/14 results
EUR 55m of
fixed cost
savings from
planned
closures(*
UPM targets:
(* 800,000 tonnes of publication paper capacity in Europe: three paper
machines will be closed during Q1/15, employee consultation process is
proceeding regarding a fourth machine
| © UPM
Growth projects
Lappeenranta biorefinery started
commercial production in January 2015
• Construction of the
biorefinery was completed
in July 2014
• Commercial production of
advanced renewable diesel
started in January 2015
• Production process works
as planned and the high-
quality product fulfils
customer specifications
• Sales agreement with
NEOT signed in June 2014
13
| © UPM
Growth projects
10% increase in pulp production capacity
• Pietarsaari pulp mill
modernisation and 70,000t
capacity expansion completed in
June 2014
• Fray Bentos pulp mill production
permit allows a further 100,000t
of production. Minor investments
were carried out in Q4 2014
• Kymi pulp mill 170,000t capacity
expansion proceeding well,
start-up by the end of 2015
• Further debottlenecking
potential at the Kaukas pulp mill14
| © UPM
Growth projects
Advancing in growth markets
• Investment in labelling materials
and woodfree speciality papers
at the UPM Changshu mill in
China proceeding well, capacity
360,000t, start-up by the end of
2015
• 50% increase in self-adhesive
labelstock coating capacity in
APAC, start-up in Q1 2015
• Expansion of filmic labelstock
production in Nowa Wies,
Poland, start-up in Q1 2015
15
| © UPM
Low investment needs in existing assets allow
growth projects with modest total capex
16
0
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400
600
800
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1 200
2008 2009 2010 2011 2012 2013 2014 2015e
EUR million
Operational investments
329
Capital expenditure
Strategic investments
Depreciation
Uruguay
acquisition
Myllykoski
acquisition
500
Estimate
375
| © UPM
Summary
• Improved profitability
• Excellent cash flow
• Strong balance sheet
• UPM is in a unique position to simultaneously
distribute attractive dividend, implement growth
projects and act on strategic opportunities
17
| © UPM
Profit
improvement
programme
EUR 150m
UPM strategy in action
18
UPM
Biorefining
UPM
Paper
Asia
UPM
Raflatac
UPM
Energy
UPM
Paper
ENA
UPM
Plywood
EBITDA target for
growth projects
EUR 200m
Biofuels:
Lappeenranta
biorefinery
Pulp: 10%
capacity increase
Labelling materials
Changshu expansion
Self-adhesive labels:
advancing in growth
markets and in higher
value added products
Business portfolio
development and
value creation
BIOCHEMICALS
BIOCOMPOSITES
BIOFUELS
New businesses
| © UPM
Strengths of UPM’s model
19
Top performanceIndustry leading
balance sheet
Attractive dividend
Strong cash flowFocused
investments
| © UPM
Cash flow
EUR million Q4/14 Q4/13 Q3/14 2014 2013
EBITDA 330 302 346 1,287 1,155
Cash flow before change in working capital
349 289 366 1,291 1,085
Change in working capital 144 57 -36 73 -128
Finance costs and income taxes -31 -84 -30 -123 -222
Net cash from operating activities 462 262 300 1,241 735
Capital expenditure -103 -91 -101 -378 -337
Asset sales and acquisitions 47 55 14 131 40
Cash flow after investing activities 406 226 213 994 438
21
| © UPM
Maturity profile and liquidity
22
0
100
200
300
400
500
600
700
800
900
1 000
2015
2016
2017
2018
2019
2020-2
026
2027
2028
2029
2030
EUR million
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200
300
400
500
600
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2015
2016
2017
2018
2019
2020-2
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2027
2028
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2030
EUR million
Liquidity
Liquidity on 31 December 2014 was EUR 1.6bn
(cash and unused credit facilities)
• syndicated credit facility EUR 500m
• bilateral committed credit facilities EUR 425m
Committed credit facilities EUR 925m
Maturity profile of outstanding debt Committed credit facilities’ maturities
| © UPM
Currency exposure
23
USD GBP JPY Others
EURm 810 500 160 170
• Key currency exposures USD, GBP and JPY
• Policy to hedge an average of 50% of the estimated net
currency cash flow for the next 12 months
Estimated annual foreign currency net cash flow, before hedging
| © UPM
UPM Biorefining Q4 2014 vs. Q4 2013
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0
20
40
60
80
100
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
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4
8
12
16
20
Q4 2014 484Q4 2013 497
SalesEUR million
1Q4 2014 67Q4 2013 66
Operating profit excluding special items
EUR million
Operating profitEUR million*)
*) excluding special items
EURmillion
% of salesBusiness performance
• Operating profit was close to the
previous year’s level as lower variable
costs offset the negative impacts of
lower average pulp sales prices and
the scheduled maintenance shutdown
at the Fray Bentos mill.
• Pulp deliveries decreased by 2% to
791,000 tonnes (810,000).
-3%
| © UPM
UPM Energy Q4 2014 vs. Q4 2013
25
0
20
40
60
80
100
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
0
10
20
30
40
50
Q4 2014 115Q4 2013 115
SalesEUR million
Q4 2014 57Q4 2013 45
Operating profit excluding special items
Operating profitEUR million*)
*) excluding special items
EURmillion
Business performance
• Operating profit increased mainly due
to lower costs and higher hydropower
generation volumes, more than
offsetting the negative sales price
impact.
• The average electricity sales price
decreased by 1% to EUR 45.5/MWh
(46.0/MWh).
EUR million % of sales
0% 12
| © UPM
UPM Raflatac Q4 2014 vs. Q4 2013
26
0
10
20
30
40
50
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
0
2
4
6
8
10
Q4 2014 330Q4 2013 298
SalesEUR million
Q4 2014 22Q4 2013 16
Operating profitEUR million*)
Operating profit excluding special items
EURmillion
Business performance
• Operating profit increased mainly due
to higher delivery volumes and lower
fixed costs, more than offsetting the
negative sales margin impact.
*) excluding special items
EUR million % of sales
611%
| © UPM
UPM Paper Asia Q4 2014 vs. Q4 2013
27
0
10
20
30
40
50
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
0
3
6
9
12
15
Q4 2014 288Q4 2013 268
SalesEUR million
Q4 2014 27Q4 2013 16
Operating profitEUR million*)
*) excluding special items
Operating profit excluding special items
EURmillion
Business performance
• The increase in operating profit was
mainly due to lower variable costs and
favourable currency impacts.
• Deliveries increased by 4% to 359,000
tonnes (344,000).
11
EUR million % of sales
7%
| © UPM
UPM Paper ENA Q4 2014 vs. Q4 2013
28
-40
-20
0
20
40
60
80
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
-4
-2
0
2
4
6
8
Q4 2014 1,361Q4 2013 1,445
SalesEUR million
-1Q4 2014 30Q4 2013 31
Operating profit excluding special items
Operating profitEUR million*)
*) excluding special items
EURmillion
-6%
Business performance
• Operating profit remained close to the
previous year’s level. Lower variable costs,
partly driven by the ongoing profit
improvement programmes, offset the
negative sales price impact.
• The average price for all paper deliveries in
euro was 1% lower than previous year.
• Paper deliveries decreased by 5% to
2,225,000 tonnes (2,332,000).
EUR million % of sales
| © UPM
UPM Plywood Q4 2014 vs. Q4 2013
29
-5
0
5
10
15
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
-5
0
5
10
15
Q4 2014 107Q4 2013 112
SalesEUR million
5Q4 2014 14Q4 2013 9
Operating profit excluding special items
Operating profitEUR million*)
-4%EUR
million
Business performance
• Operating profit increased mainly due
to improved sales margins resulting
from higher sales prices and lower
variable costs.
• Deliveries decreased by 8% to 176,000
cubic metres (191,000).
*) excluding special items
EUR million % of sales
| © UPM
Chemical pulp market
31
Source: PPPC World-20 statistics
Pulp inventories
Days of
supply
300
400
500
600
700
800
900
1 000
1 100
2008 2009 2010 2011 2012 2013 2014 2015
USD/tonne
Q4 NBSK pulp price remained on Q3 level
Q4 BHKP pulp price increased 1% from Q3
BHKP
NBSK
Source: FOEX Indexes Ltd.
15
20
25
30
35
40
45
50
55
60
65
2008 2009 2010 2011 2012 2013 2014
Hardwood
inventories
Softwood
inventories
| © UPM
Price development in the Nordic and Helsinki power markets
32
Source: Reuters
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
2006 2007 2008 2009 2010 2011 2012 2013 2014
EUR/MWh
Coal SRMC Front Year System Front Year Helsinki Front Year
Finnish and Nordic electricity prices
| © UPM3333
300
400
500
600
700
800
900
1000
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
'Jan
-14
News SC LWC
WFC WFU
EUR/t
Europe
400
500
600
700
800
900
1000
1100
1200
1300
Jan-
08Ja
n-09
Jan-
10Ja
n-11
Jan-
12Ja
n-13
'Jan
-14
News SC LWC
WFC WFU
USD/t USD/t
ChinaNorth America
Sources: PPI, RISI
Graphic paper prices
400
500
600
700
800
900
1000
1100
1200
1300
WFC r (100% chemical pulp)
Reels (mixedchemical/mechanical pulp)
Uncoated Woodfree Reels (100%chemical pulp)
| © UPM
1 500
2 000
2 500
3 000
3 500
4 000
Q1
10Q
3 10
Q1
11Q
3 11
Q1
12Q
3 12
Q1
13Q
3 13
Q1
14Q
3 14
34
1 500
2 000
2 500
3 000
3 500
4 000
Q1 1
0Q
3 1
0Q
1 1
1Q
3 1
1Q
1 1
23Q
12
Q1 1
3Q
3 1
3Q
1 1
4Q
3 1
4
Sources: Cepiprint/fine, PPPC
Fine papers demand
in Europe 0% in 2014
-2%
Graphic papers demand in Europe decreased
by 5% in Q4 and by 3% in FY 2014
'000 tonnes
1 500
2 000
2 500
3 000
3 500
4 000
Q1 1
0Q
3 1
0Q
1 1
1Q
3 1
1Q
1 1
2Q
3 1
2Q
1 1
3Q
3 1
3Q
1 1
4Q
3 1
4
Newsprint demand
in Europe -6% in 2014Magazine papers demand
in Europe -4% in 2014
-5% -8%
| © UPM
-20
-15
-10
-5
0
5
10
15
20
-6,0
-3,0
0,0
3,0
6,0
Paper demand growth (% trailing 3 month)
Sources: Cepiprint, Cepifine, OECD
Euro zone composite leading indicator* (Y/Y %)
Graphic paperdemand growth
Growth in the European economy remains low
Euro zone composite leading indicator
35