UPM Interim Report Q3/2015: UPM shows improved Q3 earnings, cash flow and balance sheet

Press Release 27.10.2015 11:00 EET

Q3 2015 compared with Q3 2014

- Earnings per share excluding special items were EUR 0.76 (0.32) and reported EUR 0.77 (0.34)
- Operating profit excluding special items was EUR 507 million, 20.0% of sales (235 million, 9.7% of sales)
- Operating profit excluding special items includes a fair value increase of biological assets in Finland totalling EUR 265 million, due to adjusted long-term wood price estimates and a change in the discount rate
- The profit improvement programme proceeded ahead of schedule, reaching a cost reduction impact of EUR 36 million in Q3 2015 (annualised EUR 144 million)
- Operating cash flow was strong at EUR 363 million (300 million)

Q1-Q3 2015 compared with Q1-Q3 2014
- Earnings per share excluding special items were EUR 1.38 (0.85) and reported EUR 1.36 (0.95)
- Operating profit excluding special items was EUR 938 million, 12.4% of sales (617 million, 8.4% of sales)
- Growth projects progressed well, dividends increased to EUR 373 million (319 million) and net debt decreased to EUR 2,465 million (2,726 million)
- UPM started ramping up the expanded Kymi Pulp mill in Q3, started commercial deliveries of advanced
renewable diesel and completed the UPM Raflatac expansions in Poland and APAC in Q2 2015
- UPM closed 800,000 tonnes of graphic paper production capacity in Europe in Q1-Q2 2015

Key figures	Q3/2015 ⁽²	Q3/2014	Q2/2015	Q1-Q3/2015⁽²	Q1-Q3/2014	Q1-Q4/2014
Sales, EURm	2,530	2,415	2,548	7,564	7,337	9,868
EBITDA, EURm ¹⁾	345	344	317	987	972	1,306
% of sales	13.6	14.2	12.4	13.0	13.2	13.2
Operating profit (loss), EURm	513	236	206	922	603	674
excluding special items, EURm	507	235	227	938	617	847
% of sales	20.0	9.7	8.9	12.4	8.4	8.6
Profit (loss) before tax, EURm	498	214	182	861	610	667
excluding special items, EURm	492	213	203	877	558	774
Profit (loss) for the period, EURm	408	182	160	723	504	512
Earnings per share, EUR	0.77	0.34	0.30	1.36	0.95	0.96
excluding special items, EUR	0.76	0.32	0.33	1.38	0.85	1.17
Operating cash flow per share, EUR	0.68	0.57	0.61	1.49	1.47	2.33
Equity per share at end of period, EUR	14.89	14.33	14.30	14.89	14.33	14.02
Gearing ratio at end of period, %	31	36	35	31	36	32
Net interest-bearing liabilities at end of period, EURm	2,465	2,726	2,635	2,465	2,726	2,401

1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in fair value of biological assets and wood harvested, excluding the change in fair value of unrealised cash flow and commodity hedges, excluding the share of results of associated companies and joint ventures, and special items.

2) Includes a fair value increase of biological assets in Finland totalling EUR 265 million, due to adjusted long-term wood price estimates and a change in the discount rate.

Jussi Pesonen, President and CEO comments on the results

"UPM's performance continued to improve during the third quarter. This was visible in our earnings, cash flow and balance sheet. The results were boosted by our successful profit improvement programme, which proceeded ahead of schedule. During the third quarter, we achieved 96 percent of targeted savings.

Most of our businesses enjoyed a positive third quarter. UPM Biorefining performed well on favourable pulp markets and showed good cost efficiency. UPM Energy benefited from a good volume of hydropower, which it was able to leverage on volatile markets. UPM Raflatac continued to improve its performance and was able to respond to market growth with timely growth investments. UPM Plywood continued on a strong path.

UPM Paper ENA improved from the previous quarter thanks to lower costs and seasonally higher volumes. UPM Paper Asia also improved slightly from the second quarter. Both paper businesses continued to be negatively affected by currency hedges.

Our growth investment programme is nearing completion and our focus turns to reaping the benefits in 2016 and beyond. As for major projects, Kymi pulp mill expansion started the ramp-up and investment in the new UPM Changshu production unit is being finalised as we speak. In order to secure the positive volume development in pulp, we also plan to make minor investments in UPM Fray Bentos pulp mill in conjunction with the annual maintenance shutdown during the fourth quarter.

Overall, I'm encouraged by our performance during the third quarter. Our efficiency has increased and our growth projects are responding to market demand, so we're well-positioned to increase our bottom line going forward".

Outlook for 2015

UPM confirms its full year 2015 outlook:

The improved profitability achieved in 2014 is expected to continue in 2015, and there are prospects for further improvement. Profitability is underpinned by the EUR 150 million profit improvement programme, favourable currencies, 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 compared to 2014.