UPM Interim Report Q1 2022: Strong performance supported by tight markets

Stock Exchange Release 26.4.2022 9:50 EEST

UPM-Kymmene Corporation        Stock Exchange Release (Interim Report)        26 April 2022 at 09:50 EEST

UPM Interim Report Q1 2022:
Strong performance supported by tight markets

Q1 highlights

  • Sales increased by 12% to EUR 2,507 million (2,234 million in Q1 2021)
  • Comparable EBIT was in line with last year at EUR 277 million, 11.0% of sales (279 million, 12.5%)
  • Operating cash flow was EUR 12 million (217 million)
  • Net debt increased to EUR 837 million (83 million) and net debt to EBITDA ratio was 0.46 (0.06)
  • Sales prices increased in all business areas and more than offset the negative impact of higher variable costs
  • The strike in Finland affected production and delivery volumes especially in the pulp, paper and biofuels businesses
  • Cash funds and unused committed credit facilities totalled EUR 2.9 billion at the end of Q1 2022
  • Transformative growth projects in Uruguay and in Germany proceed well, investment estimate updated for the Leuna biorefinery
  • UPM decided to suspend its deliveries to Russia, purchasing of wood in Russia and the UPM Chudovo plywood mill operations
  • In April, UPM and Paperworkers’ Union agreed on first-ever business-specific collective labour agreements and the strike ended at UPM mills in Finland

Key figures

Sales, EURm        2,507        2,234        2,673        9,814
Comparable EBITDA, EURm        377        389        470        1,821
% of sales        15.0        17.4        17.6        18.6
Operating profit, EURm        183        279        415        1,562
Comparable EBIT, EURm        277        279        461        1,471
% of sales        11.0        12.5        17.2        15.0
Profit before tax, EURm        179        272        420        1,548
Comparable profit before tax, EURm        273        272        466        1,457
Profit for the period, EURm        139        227        340        1,307
Comparable profit for the period, EURm        232        228        373        1,204
Earnings per share (EPS), EUR        0.25        0.42        0.63        2.41
Comparable EPS, EUR        0.42        0.42        0.69        2.22
Return on equity (ROE), %        5.0        9.7        12.6        12.7
Comparable ROE, %        8.4        9.7        13.8        11.7
Return on capital employed (ROCE), %        5.8        9.5        12.7        12.4
Comparable ROCE, %        8.5        9.5        14.1        11.7
Operating cash flow, EURm        12        217        406        1,250
Operating cash flow per share, EUR        0.02        0.41        0.76        2.34
Equity per share at the end of period, EUR        20.11        17.06        20.34        20.34
Capital employed at the end of period, EURm        13,840        11,933        13,759        13,759
Net debt at the end of period, EURm        837        83        647        647
Net debt to EBITDA (last 12 months)        0.46        0.06        0.35        0.35
Personnel at the end of period        16,843        17,670        16,966        16,966

Jussi Pesonen, President and CEO, comments on the Q1 results:

“Market demand was strong and UPM businesses performed well. We delivered good Q1 results, on par with the corresponding quarter of last year. Prices increased significantly in all our businesses, more than offsetting the rise in variable costs. The result is a good achievement when viewed against the background of the strikes that took place at most of our Finnish mills and the war in Ukraine.

Quarterly sales increased by 12% to EUR 2,507 million, and comparable EBIT was in line with last year at EUR 277 million, 11.0% of sales. Operating cash flow was EUR 12 million, impacted by inflation and energy-related items in working capital. Net debt at the end of March was EUR 837 million. Cash funds and unused committed credit facilities totalled EUR 2.9 billion. Our strong liquidity and balance sheet are a great strength considering our ongoing transformative growth investments and the unpredictability of the operating environment.

Prices increased in all UPM businesses and the upward trend in market prices continued also for UPM Fibres. Our Uruguay pulp mill and UPM Timber performed very well. However, with two-thirds of our pulp production down because of the strikes in Finnish mills, the business area result was modest in the current markets.

UPM Communication Papers returned to profitable numbers, thanks to tight market as well as timely and successful commercial execution. The business experienced a steep rise in input costs, particularly energy, but was able to increase sales prices accordingly. A third of our graphic paper capacity was down because of the strike in Finland, but UPM Communications Papers was able to cover deliveries partially from existing stock and the mills outside of Finland.

The market for UPM Specialty Papers’ release liner and packaging paper continued to be good, and prices increased. However, our delivery volumes were lower than usual due to the strikes in Finland. Fine paper prices increased in Asia. High input costs were met with mitigating actions.

UPM Raflatac’s underlying demand and margins continued to be healthy despite significantly higher raw material, energy and logistics costs. Q1 comparable EBIT includes a EUR 13 million provision for expected credit losses related to business in Russia. Delivery volumes decreased as the strikes in Finland caused raw material shortages and production curtailments.

UPM Plywood achieved another record quarter in earnings, thanks to strong demand and high sales prices. The new business-specific collective labour agreement signed in December improved flexibility in production in our Finnish mills. This is particularly important in the current strong markets with declining Russian volumes.

UPM Energy reported strong Q1 results, thanks to continued high prices in the Finnish price area. However, Finnish prices and the business area result came down from the record high levels of Q4. The OL3 nuclear power plant unit was connected to the national grid in March and production is rising steadily. Once the unit starts regular commercial operations in Q3, it will markedly increase UPM’s CO2 free electricity generation. In addition, this will improve Finland's self-sufficiency regarding electricity.

In other operations, UPM Biofuels had no production or deliveries because of the strikes in Finland. The market for advanced renewable fuels continued to be strong.

The geopolitical environment in Europe has changed dramatically after Russia’s attack on Ukraine. Consequently, the uncertainties related to European and world economy have increased significantly. Our primary concern are the people suffering from the war, and we have started delivering humanitarian and material aid to Ukraine. UPM ceased its deliveries to Russia and wood sourcing in and from Russia. We also decided to dial down production in our Chudovo plywood mill.

The Paperworkers' Union's long strike at UPM Pulp, UPM Communication Papers, UPM Specialty Papers, UPM Raflatac and UPM Biofuels units in Finland affected our Q1 production volumes greatly. Business-specific collective labour agreements were reached on 22 April, and we are currently ramping up production in the affected mills. Our plywood mills and sawmills have operated as usual during the first quarter.

We entered this negotiation round with a long-term view to ensure the future competitiveness of our businesses. We achieved our goal, seven business-specific agreements, that improve productivity while at the same time offer competitive terms for our employees. In Finland we have more than 6,000 employees and nearly EUR 10 billion of assets. We have the responsibility for enabling our people and businesses prosper in this country. Business-specific collective labour agreements play a key role in this. The new agreements will improve the flexibility of our units and provide opportunities for investments. Improved competitiveness will ultimately benefit our customers, too.

At the same time, we have attractive major growth projects under construction in Uruguay and Germany, and under consideration in the Netherlands. The projects are an important part of our strategy, enabling future value creation and earnings growth.

The pulp mill project in Paso de los Toros is progressing well towards its start-up by the end of Q1 2023. With the very competitive cash cost level of USD 280 per delivered tonne of pulp, the mill will bring significant earnings growth once up and running.

The biochemicals refinery project in Leuna is now also progressing well. We have finalised a new investment estimate of EUR 750 million for the project, considering the scheduled ramp-up by the end of 2023 and the current high-cost environment. Supported by high customer demand, the investment case for the project is attractive and the long-term growth strategy for the biochemicals business looks increasingly appealing. Thus, we already have a team in place planning for the next growth steps beyond the first refinery in Leuna.

In biofuels, the basic engineering phase of a potential new biorefinery is continuing at full pace, now focusing on the site in Rotterdam. The demand for climate solutions is clearly on the rise. At the same time, the dramatically changed geopolitical situation has further underlined the need to rapidly find alternatives for fossil fuels. I believe that UPM can play an important role in decarbonising society and creating a future beyond fossils.

As the latest example of UPM’s commitment to sustainability, in March we published the Forest Action Programme that will run until 2030. This programme is steering our global wood sourcing operations and covers our forests in Finland and the United States as well as plantations in Uruguay. Forest Action pushes us beyond current standard requirements and its measures will have a positive impact on all fundamental aspects of sustainable forestry: climate, biodiversity, soil, water and social contribution. By taking concrete actions, we can make the 2020s a decade of sustainable growth."

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 war in Ukraine, the ongoing pandemic, growth in the European and global economy, the energy market situation in Europe and the tight raw material and logistics markets.

Good demand is expected to continue for most UPM products in 2022. In the first half 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, and the two scheduled pulp mill maintenance shutdowns in Finland in Q2.

Sales prices and variable costs are expected to increase in most of UPM businesses in H1 2022. 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. Comparable EBIT in the full year 2022 is expected to be on similar level or higher than in 2021.

Invitation to UPM’s webcast and press conference on Q1 2022 Interim Report

A webcast and a conference call for analysts and investors in English language begins at 13:15 EEST. 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: UPM Interim Report for January–March 2022
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PIN code: 78465553#

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 14:45 EEST, CEO Jussi Pesonen will present the Q1 results 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.


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 165–166 of the Annual Report 2021. Risks and opportunities are discussed on pages 34–35, and risks and risk management are presented on pages 131–135.


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 Fibres, 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 17,000 people worldwide and our annual sales are approximately EUR 9,8 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com

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