Interim report Q1/2016: Growth projects and cost efficiency measures deliver improved earnings

​UPM-Kymmene Corporation Stock Exchange Release 26 April 2016 at 9:25 EET 

Interim report Q1/2016: Growth projects and cost efficiency measures deliver improved earnings

Q1 2016 highlights
· Comparable EBIT increased by 34% to EUR 281 million (210 million).
· Growth projects contributed to UPM's earnings, with increasing deliveries in pulp, biofuels, label papers, fine papers in Asia and self-adhesive label materials.
· Variable and fixed costs decreased significantly, showing the full impact of last year's cost efficiency measures.
· Operating cash flow was strong at EUR 341 million (108 million).
· Net debt decreased to EUR 1,873 million (2,419 million), and gearing to 23% (31%).


 

Jussi Pesonen, President and CEO, comments on the Q1 result:
"All in all, 2016 got off to a very good start. During the first quarter, we achieved a good level of operational efficiency, we were able to lower our costs significantly and the market environment was mostly favourable. Our comparable EBIT increased by 34% year-on-year to reach a record level in years. In addition, our cash flow was particularly strong, driving net debt further down.

The first quarter showed the full impact of last year's cost efficiency measures. Costs decreased in all businesses, but the impact was particularly visible in UPM Paper ENA's improved profitability. Our customers continued to rely on us with their business, while we improved operational efficiency significantly by closing up 800,000 tonnes of capacity.

Market demand continued to develop mostly favourably. We were able to respond to the increased customer demand with our growth projects in UPM Biorefining, UPM Paper Asia and UPM Raflatac. The ramp-ups started well and contributed to the deliveries and earnings.

Our work continues to realise the full earnings potential from the completed growth projects. Additionally, we will finalise the ongoing projects in Otepää plywood mill in Estonia and UPM Kaukas pulp mill in Finland. We will continue implementing our cost efficiency measures across all businesses. In the case of UPM Paper ENA, we are ensuring competitiveness by closing Madison Paper Industries in the US and selling UPM Schwedt paper mill in Germany.

We look confidently forward. Our balance sheet and cash flow are strong and put us in a good position to act on future opportunities."

Outlook for 2016
UPM's profitability improved in 2015 and the improvement is expected to continue in 2016. The business performance is underpinned by the company's growth projects and continuous cost efficiency measures.

UPM's growth projects are expected to contribute positively to the company's earnings in 2016, compared with 2015. UPM continues its measures to reduce variable and fixed costs also in 2016. Currencies are expected to contribute positively as hedges roll over, assuming relevant currencies stay at the same level as at the end of 2015.

Conference call and press conference
UPM's President and CEO Jussi Pesonen will present the results in a webcast and a conference call for analysts and investors, held in English language, today at 13:15 EET.

Later in the afternoon, Jussi Pesonen will present the results in a press conference held in Finnish language at the UPM Group Head Office (The Biofore House) in Helsinki, Alvar Aallon katu 1, at 14:30 EET.

Conference call and webcast details:

The conference call can be participated in either by dialling a number in the list below or following the webcast online at www.upm.com or through this link.

Only participants who wish to ask questions in the conference call need to dial in. All participants can view the webcast presentation online. We recommend that participants start dialing in 5-10 minutes prior to ensure a timely start of the webcast.

The presentation is available at www.upm.com for 12 months after the call.

Conference call title: UPM Interim Report for January - March 2016

Direct telephone numbers:

BE: +3224040635
DK: +45 823 331 78
FI: +358981710495
FR: +33170750712
UK: +442031940552
NO: +4723500211
SE: +46856642702
US: +18557161597

International telephone numbers with a pin code 95858953#

AU: +61 (0) 284058555
AT: +43 (0) 19287909
CH: +41 (0) 445831883
CN: +86 4006815487
DE: +49 (0) 6922224998
ES: +34 914146225
HK: +852 30600228
IN: 0018038524627
IR: +353 (0) 12475065
IT: +39 (0) 236010935

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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 page 18 of the 2015 Annual Report. Risks and opportunities are discussed on pages 17-18 and risks and risk management are presented on pages 84-86 of the report.

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

UPM, Media Relations
9.00-16.00 EET
tel. +358 40 588 3284
media@upm.com

UPM
Through the renewing of the bio and forest industries, UPM is building a sustainable future across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper ENA and UPM Plywood. Our products are made of renewable raw materials and are recyclable. We serve our customers worldwide. The group employs around 19,600 people and its annual sales are approximately EUR 10 billion. UPM shares are listed on NASDAQ OMX Helsinki. UPM - The Biofore Company - www.upm.com

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UPM Interim Report Q1 2016