UPM financial statements release 2021: Earnings back to strong pre-pandemic levels, refined completion plan for Uruguay project ready

Stock Exchange Release 27.1.2022 10:00 EET

UPM-Kymmene Corporation        Financial Statements Release 2021        27 January 2022 at 10:00 EET

UPM financial statements release 2021:
Earnings back to strong pre-pandemic levels, refined completion plan for Uruguay project ready

Q4 2021 highlights

  • Sales increased by 22% to EUR 2,673 million (2,188 million in Q4 2020)
  • Comparable EBIT increased by 83% to EUR 461 million, 17.2% of sales (252 million, 11.5%)
  • Operating cash flow was EUR 406 million (347 million)
  • Net debt increased to EUR 647 million (56 million) and net debt to EBITDA ratio was 0.35 (0.04)
  • The unprecedented energy market situation enabled UPM Energy to reach record earnings but added to the paper businesses' costs
  • The fair value of UPM's sustainably managed forests increased due to higher wood volume, growth, and price estimates
  • Refined completion plan for the Uruguay project ready and investment case confirmed, start-up scheduled by the end of Q1 2023
  • UPM was listed in the Dow Jones European and World Sustainability Indices (DJSI) for 2021–2022 as the only company in its industry
  • UPM was recognized with a CDP ‘A’ score for its sustainable forestry operations.

2021 highlights

  • Sales increased by 14% to EUR 9,814 million (8,580 million in 2020)
  • Comparable EBIT increased by 55% to EUR 1,471 million (948 million), and was 15.0% (11.1%) of sales
  • Operating cash flow was EUR 1,250 million (1,005 million)
  • Cash funds and unused committed credit facilities totalled EUR 2.5 billion at the end of December
  • UPM Board of Directors proposes a dividend of EUR 1.30 per share be paid in respect of the 2021 financial year (1.30).
  • UPM started the basic engineering phase of a next-generation biofuels refinery in January
  • UPM sold the UPM Shotton newsprint mill in the UK
  • The global sustainability ratings provider EcoVadis recognised UPM on the highest possible Platinum level for its responsible performance in 2021
  • UPM was recognised as one of the world’s 37 most sustainable companies by the UN Global Compact
  • UPM joined The Climate Pledge in February, committed to reach the targets of the Paris Agreement 10 years in advance

Key figures

Sales, EURm        2,673        2,188        2,523        9,814        8,580
Comparable EBITDA, EURm        470        392        535        1,821        1,442
% of sales        17.6        17.9        21.2        18.6        16.8
Operating profit, EURm        415        253        564        1,562        761
Comparable EBIT, EURm        461        252        424        1,471        948
% of sales        17.2        11.5        16.8        15.0        11.1
Profit before tax, EURm        420        250        558        1,548        737
Comparable profit before tax, EURm        466        248        418        1,457        924
Profit for the period, EURm        340        190        497        1,307        568
Comparable profit for the period, EURm        373        191        359        1,204        737
Earnings per share (EPS), EUR        0.63        0.35        0.92        2.41        1.05
Comparable EPS, EUR        0.69        0.35        0.66        2.22        1.37
Return on equity (ROE), %        12.6        8.0        19.9        12.7        5.8
Comparable ROE, %        13.8        8.0        14.3        11.7        7.5
Return on capital employed (ROCE), %        12.7        9.1        17.9        12.4        6.7
Comparable ROCE, %        14.1        9.1        13.4        11.7        8.3
Operating cash flow, EURm        406        347        318        1,250        1,005
Operating cash flow per share, EUR        0.76        0.65        0.60        2.34        1.89
Equity per share at the end of period, EUR        20.34        17.53        19.08        20.34        17.53
Capital employed at the end of period, EURm        13,759        11,555        13,039        13,759        11,555
Net debt at the end of period, EURm        647        56        667        647        56
Net debt to EBITDA (last 12 months)        0.35        0.04        0.38        0.35        0.04
Personnel at the end of period        16,966        18,014        17,085        16,966        18,014

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

“2021 was a strong year for UPM. We successfully managed to navigate an exceptional operating environment, delivering performance that exceeded UPM’s financial targets. Our earnings returned to strong pre-pandemic levels, and five out of our six business areas surpassed their long-term financial targets. The world economy recovered quickly from the previous year’s deep slowdown. Demand for our products was strong in all business areas. We improved our margins, despite significant raw material and energy cost increases.

The year ended with a solid Q4. Demand for our products was good and the upward trend in sales prices and variable costs continued. The defining feature of the quarter was the unprecedented energy market situation, which had a significant effect on our paper businesses, yet allowed our energy business to achieve record earnings. In net terms, high energy prices had a negative effect on our results. The results also included a notable increase in the value of our sustainably managed forests as a result of higher volume, growth and price estimates.

Quarterly sales increased by 22% to EUR 2,673 million, and comparable EBIT increased by 83% to EUR 461 million. Operating cash flow was EUR 406 million, which is a clear increase from the same quarter last year. Our net debt at the end of the year was EUR 647 million. Cash funds and unused committed credit facilities totalled EUR 2.5 billion. Our solid balance sheet is a great strength in light of our ongoing transformative growth investments and the unpredictability of the operating environment.

UPM Biorefining reported solid results, even though they were held back by the scheduled maintenance shutdown at the UPM Kymi pulp mill. Pulp, timber and biofuel prices remained at good levels throughout Q4, and full year pulp production reached an all-time high.

UPM Energy benefitted from the exceptional situation in the energy markets and achieved its best quarterly results ever by far. Such excellent performance was the result of both record-high prices of electricity and successful hydropower optimisation in volatile markets. The Olkiluoto 3 nuclear reactor reached first criticality in December, making progress towards the scheduled start of electricity generation in February 2022.

UPM Communication Papers continued making losses throughout Q4. The main reason for this was the exceptional increase in energy costs. Owing to existing customer contracts, we were unable to adjust paper prices at the same pace, despite tight paper markets.

Earnings for UPM Specialty Papers were also affected by the high cost of fibre and energy. Demand for label, release and packaging paper remained strong, driven by fast-moving consumer goods and e-commerce. Fine paper markets in Asia remained soft.

Profitability at UPM Raflatac was once again good, and well above pre-pandemic levels. Demand continued to remain strong, and prices increased, but unexpectedly rapid cost inflation and supply chain bottlenecks have necessitated mitigating actions.

UPM Plywood had a record quarter and year in earnings. Demand was strong for spruce plywood and good for birch plywood, and sales prices were higher both in quarterly and yearly terms.

In Finland, we have a new labour market situation as the forest products companies are now carrying out negotiations directly with the unions. At UPM Plywood and UPM Timber, agreements benefiting both the employees and the businesses were signed with the Industrial Union in December 2021.

Meanwhile the Paperworkers’ Union has declined invitations to the negotiations sent by UPM Pulp, UPM Communication Papers, UPM Specialty Papers, UPM Raflatac and UPM Biofuels. The union is aiming to negotiate a single group-level agreement with the corporation. UPM has a unique portfolio of versatile businesses, and so our starting point is to negotiate business-specific agreements in order to support growth and competitiveness.

Unfortunately, this has led to a strike lasting several weeks. We aim to start negotiations as soon as possible and to look for solutions together. Our focus is not on next month or next year, but rather on pursuing mutually beneficial outcomes that will enable each business and their employees to prosper well into the future, into the 2030s.

During the strike we have been serving our customers from our mills outside Finland as much as possible. At this point in time, we are not disclosing estimates of the economic impact of the strike.

Looking at our large investment projects, the construction of the Paso de los Toros pulp mill is now at a point where we can fine-tune the project’s completion plan. The main equipment and key resources have arrived in Uruguay, and so the most material uncertainties have now been resolved. At the same time, successive waves in the pandemic and tight global supply chains have continued to challenge the project. A minor delay in the start-up schedule is inevitable, and the mill will start production by the end of Q1 2023, with a 10% increase in the updated investment estimate. Most importantly, the investment case remains strong, and we can confirm the cash cost level of approximately USD 280 per delivered tonne of pulp is intact.

Business preparation at UPM Biochemicals is moving at good pace, and there is keen interest in the various products of the new biorefinery, confirming the business opportunity and longer-term growth strategy. However, the pandemic has materially slowed down the completion of the detailed engineering in Leuna. Disruptions to global supply chains have affected both the availability and costs of critical construction materials. As a result, we are updating our plans and estimate that the start-up would take place by the end of 2023. The capital expenditure estimate will be updated in due course.

Basic engineering of the next-generation biofuels refinery is now at a point where we have completed site assessments in Kotka and Rotterdam. Work continues in Rotterdam, where the operating environment is more favourable for the biofuels business. The current investment environment is very challenging for new major projects like this in terms of resourcing, schedules and costs. Therefore, we are not planning to make further decisions before the end of this year.

Meanwhile, we are continuing to build the business platform for our new innovation-driven businesses. As the next step, we are forming a new business unit by combining UPM Biofuels, UPM Biochemicals, UPM Biomedicals and UPM Biocomposites businesses. The aim is to speed up business growth and to leverage the capabilities and competences across projects efficiently. This unit will inherit the name UPM Biorefining and will be reported as part of Other operations for the time being. At the same time, UPM Pulp and UPM Timber will be reported as UPM Fibres business area. UPM Fibres continues to be led by Bernd Eikens and Winfried Schaur leads UPM Biorefining; both are members of UPM’s Group Executive Team. These changes will take place as of Q1 2022.

In 2021, stakeholder interest in mitigating climate change and fostering biodiversity reached new levels. At UPM we have ambitious, science-based targets and a strong track record in taking tangible actions in both areas. During the first half of 2022 we will be publishing our new, even more ambitious global forest responsibility programme. Responsibility is an integral part of our Biofore strategy and a driver for our future success.

I would like to thank all UPMers for their contributions and commitment throughout the year. Strong performance in 2021 will also benefit our employees worldwide as our incentive system will reward them with short-term incentives this April, totalling approximately EUR 60 million. Every UPMer will receive on average approximately EUR 3,500.

With confidence in 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 2021 to our Annual General Meeting.”

Outlook for 2022

UPM’s earnings recovered to the strong pre-pandemic level in 2021 and overall, 2022 is expected to be another good year for the company.

There are significant uncertainties in the outlook for 2022, related to the ongoing pandemic, continuation of the global economic recovery, the unusual energy market situation, tight raw material supply chains and the labour negotiations in Finland.

Good demand is expected to continue for most UPM products in 2022. In the early part of the year, production and earnings are affected by the strike at the Finnish units of UPM Pulp, UPM Biofuels, UPM Raflatac, UPM Specialty Papers and UPM Communication Papers.

Sales prices for many UPM products are expected to increase in the beginning of 2022, most notably the graphic and specialty paper prices. Sales prices for pulp and energy are expected to continue on good levels in the early part of the year.

Many variable cost items are expected to increase in 2022 or stay at elevated level. UPM will continue to manage margins with product pricing, optimising its product and market mix, efficient use of assets as well as by taking measures to improve variable and fixed cost efficiency.

UPM’s comparable EBIT in H1 2022 is expected to be on similar level compared to H1 2021.

Invitation to UPM’s webcast and press conference on Financial Statements for the year 2021

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 2021
International telephone numbers:

Argentina Toll: +54 1152526536
Australia Toll: +61 284058549
Austria Toll: +43 19287907
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PIN code: 84713778#

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.

Due to the Covid-19 pandemic, no press conference will be held in the Biofore House. However, CEO Jussi Pesonen will host an online media event in Finnish language at 14:45 EET.


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 Annual Report 2020. Risks and opportunities are discussed on pages 36–37, and risks and risk management are presented on pages 129–133.


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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