UPM Financial Statements 2020: A positive finish to an exceptional year – transformative growth projects on budget and on schedule

Stock Exchange Release 28.1.2021 9:50 EET

UPM-Kymmene Corporation       Financial Statements Release 2020         28 January 2021 at 09:50 EET

UPM Financial Statements 2020:
A positive finish to an exceptional year – transformative growth projects on budget and on schedule

Q4 2020 highlights

  • Sales decreased by 11% to EUR 2,188 million (2,447 million in Q4 2019) due to lower pulp prices and lower deliveries and prices of graphic papers
  • Comparable EBIT was EUR 252 million, 11.5% of sales (343 million, 14.0%), down 27% year-over-year
  • Operating cash flow was EUR 347 million (592 million)
  • Successful health and safety measures enabled uninterrupted business operations and progress in transformative growth projects
  • The year ended on a positive note, with good demand for UPM’s products
  • UPM issued a EUR 750 million Green Bond under the EMTN programme
  • UPM was listed as the industry leader in the Dow Jones Sustainability Indices (DJSI) and received a triple ‘A’ score from CDP for outstanding environmental performance
  • UPM moves forward with biofuels growth plans and starts the basic engineering phase of a next-generation biorefinery

2020 highlights

  • Sales decreased by 16% to EUR 8,580 million (10,238 million in 2019) due to lower deliveries of graphic papers and lower pulp and paper prices
  • Comparable EBIT was EUR 948 million, 11.1% of sales (1,404 million, 13.7%), down 32% year-over-year
  • Operating cash flow was EUR 1,005 million (1,847 million)
  • Net debt was EUR 56 million (-453 million)
  • Cash funds and unused committed credit facilities totalled EUR 3.2 billion at the end of 2020
  • The Board proposes a dividend of EUR 1.30 (1.30) per share
  • The COVID-19 containment measures significantly decreased demand for graphic papers, while UPM Raflatac and UPM Specialty Papers achieved record earnings
  • UPM's transformative pulp project in Uruguay and biochemicals project in Germany are well on track with the planned start-up timeline
  • Closures of UPM Kaipola and UPM Chapelle paper mills and UPM Jyväskylä plywood mill, streamlining in several businesses and functions

Key figures

Sales, EURm2,188  2,447  2,028  8,580  10,238   
Comparable EBITDA, EURm392  442  331  1,442  1,851   
% of sales17.9  18.1  16.3  16.8  18.1   
Operating profit, EURm253  336  117  761  1,344   
Comparable EBIT, EURm252  343  215  948  1,404   
% of sales11.5  14.0  10.6  11.1  13.7   
Profit before tax, EURm250  324  109  737  1,307   
Comparable profit before tax, EURm248  331  207  924  1,367   
Profit for the period, EURm190  263  83  568  1,073   
Comparable profit for the period, EURm191  261  158  737  1,119   
Earnings per share (EPS), EUR0.35  0.50  0.15  1.05  1.99   
Comparable EPS, EUR0.35  0.49  0.29  1.37  2.07   
Return on equity (ROE), %8.0  10.5  3.5  5.8  10.7   
Comparable ROE, %8.0  10.4  6.7  7.5  11.2   
Return on capital employed (ROCE), %9.1  11.9  4.3  6.7  12.3   
Comparable ROCE, %9.1  12.2  7.9  8.3  12.8   
Operating cash flow, EURm347  592  365  1,005  1,847   
Operating cash flow per share, EUR0.65  1.11  0.69  1.89  3.46   
Equity per share at the end of period, EUR17.53  18.87  17.54  17.53  18.87   
Capital employed at the end of period, EURm11,555  11,474  10,721  11,555  11,474   
Net debt at the end of period, EURm56  -453  89  56  -453   
Net debt to EBITDA (last 12 months)0.04  -0.24  0.06  0.04  -0.24   
Personnel at the end of period18,014  18,742  18,349  18,014  18,742   

Jussi Pesonen, President and CEO, comments on the Q4 and 2020 full year results:

“In 2020, the global pandemic and related lockdowns caused an abrupt and severe economic shock that put all societies and businesses to the test. With decisive measures we ensured the safety of UPM employees and the satisfactory performance of the company. Our growth projects proceeded as planned.

The year ended on a positive note. In the fourth quarter, the demand for our products was good. Sales of EUR 2,188 million and comparable EBIT of EUR 252 million were higher than on the two previous quarters, although considerably down from the corresponding quarter of 2019.

The star performers of the quarter, as for the whole year, were UPM Raflatac and UPM Specialty Papers. These business areas benefited from favourable markets and changes in consumer behaviour, e-commerce and retail. Both businesses had taken commercial and efficiency measures to improve profitability and started the year with already improved margins.

In UPM Biorefining the demand for pulp, renewable fuels and timber was good. China is leading the demand growth in the pulp market. Market prices for pulp have been at a low level for quite some time, and the first price increases during the fourth quarter were offset by changes in currencies. Two extensive pulp mill maintenance shutdowns pushed the quarterly results down to break-even.

The performance of UPM Communication Papers in the last quarter was better than the two previous quarters due to seasonally low energy costs and higher year-end demand. However, the market demand for graphic papers was down 14% year-over-year. The closure of UPM Kaipola paper mill in Finland was finalised at the beginning of 2021 and the sales process of UPM Shotton paper mill in Wales is ongoing. The measures taken were timely and necessary for the efficiency and competitiveness of the business.

Excellent hydrological conditions continued, and UPM Energy again delivered strong earnings. Energy prices decreased, both during the quarter and on a yearly basis. In UPM Plywood, demand continued to be good in construction end-uses, but on a low level in industrial end-uses. The markets remained highly competitive.

In 2020, the exceptional shortfall in graphic paper demand due to COVID lockdowns and unusually low pulp prices had a clear impact on our earnings. At the same time, I am very proud of the spectacular performance of our specialty packaging materials businesses, UPM Raflatac and UPM Specialty Papers.

Our sales decreased by 16% in 2020, and comparable EBIT was down 32% year-over-year. Operating cash flow decreased to EUR 1,005 million from the all-time high of the previous year. Our financial standing remains very strong with net debt close to zero and cash funds and unused committed credit facilities totalling EUR 3.2 billion at the end of 2020.

During a year of high uncertainty our focus was clear: ensure the performance of all our operations and at the same time secure the successful implementation of our strategic growth projects. We took several measures to decrease fixed costs, which are expected to result in annual savings of approximately EUR 130 million. Our two major growth projects in Uruguay and in Germany are on schedule and on budget.

The year 2021 will be an important year of construction and preparation for the projects in Paso de los Toros in Uruguay, and in Leuna, Germany. The construction sites in Uruguay are currently employing 3,000 workers and the number will double later this year. The construction of the biochemical refinery in Germany began during Q4. Simultaneously, we are setting up the business for the eventual market entry. During the most intensive year of these projects, UPM’s total capital expenditure is expected to be EUR 2 billion.

Our transformation does not stop there. Today we announced the next step to advance our biofuels growth plans. We are starting the basic engineering phase of a next-generation biorefinery with an annual capacity of 500,000 tonnes of high-quality renewable fuels. The planned biorefinery would scale up UPM’s successful biofuels business to a new level. At the same time, it would further improve the long-term competitiveness and sustainability performance of UPM Biofuels by introducing several sustainable feedstocks and achieving uniquely high CO2 reduction compared to biofuels currently on the market.

With its Biofore strategy UPM is well positioned to respond to global megatrends and growing demand for renewable products. We enable our customers and consumers to make more sustainable choices. Our purpose is to create a future beyond fossils.

Sustainability is at the core of everything we do. In 2020, we committed to the UN Business Ambition for 1.5°C and to the science-based measures to mitigate climate change. We were recognised as a UN Global Compact LEAD company, listed as the industry leader in the Dow Jones European and World Sustainability Indices (DJSI), and received a triple ‘A’ score from CDP for outstanding environmental performance. We also established a Green Finance Framework and issued our first Green Bond. Our syndicated revolving credit facility is also linked to biodiversity and climate targets.

In the coming quarters, we will do our utmost to ensure business continuity and performance as well as secure safe and successful implementation of our major growth projects. Even though there are some signs of recovery, the pandemic is not over yet.

Confident with our financial position and future cash generation, UPM’s Board of Directors has today proposed a dividend of EUR 1.30 (1.30) per share for 2020."

Outlook for 2021

The global economy is expected to start recovering in 2021 from the deep downturn experienced in 2020. World regions will progress at different pace, and China is leading this development. Demand for most UPM products is influenced by overall economic activity and hence, depends on the shape and rate of the economic recovery.

The COVID-19 pandemic continues to cause significant uncertainty in 2021. In 2020, lockdowns had a significant negative impact on graphic paper demand but supported the strong demand for self-adhesive labelling materials and specialty papers. Opening of the economies is likely to allow for some normalisation of these demand impacts. However, further waves of the pandemic and related lockdowns remain possible.

In the beginning of 2021, pulp prices are expected to increase compared with Q4 2020. Paper prices are expected to decrease moderately, compared with Q4 2020.

UPM will continue to implement measures to decrease fixed and variable costs.

UPM’s comparable EBIT in H1 2021 is expected to be lower than in H1 2020, due to lower paper prices and higher maintenance activity. Comparable EBIT is expected to recover in H2 2021.

Invitation to UPM’s webcast and press conference on Financial Statements for the year 2020

A webcast and a conference call for analysts and investors in English language begins at 13:15 EET. UPM’s financial results will be presented by the President and CEO Jussi Pesonen and CFO Tapio Korpeinen. All participants can view the webcast online at www.upm.com or through this link, but participants who wish to ask questions must attend the conference call by dialling a number in the list below:

Conference call title: Financial Statement Release for the Year 2020
International telephone numbers:

Argentina Toll: +54 1152526536
Australia Toll: +61 284058549
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PIN code: 62514656#

We recommend that participants dial in 5-10 minutes prior to ensure a timely start of the webcast. The webcast will be available at www.upm.com for 12 months after the call.

Later in the afternoon, at 14:30 EET, CEO Jussi Pesonen will present the Financial Statements for 2020 in a press conference held in the Finnish language both at the Biofore House and online. Due to the Covid-19 pandemic, participation to the Biofore House event is restricted to members of the media only. Others are asked to follow the presentation online. To register to the live or online event, visit this link. Only the registered will receive the link to the online press conference.


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 pages 160–161 of the 2019 Annual Report. Risks and opportunities are discussed on pages 28–29 and 129-131, and risk management is presented on pages 189–195 of the report.


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

UPM, Media Relations
Mon-Fri 9:00-16:00 EET
tel. +358 40 588 3284

We deliver renewable and responsible solutions and innovate for a future beyond fossils across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers and UPM Plywood. As the industry leader in responsibility we are committed to the UN Business Ambition for 1.5°C and the science-based targets to mitigate climate change. We employ 18,000 people worldwide and our annual sales are approximately EUR 8.6 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com

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