UPM Interim Report Q3 2022: UPM delivers all-time high quarterly results with excellent performance in all businesses

Stock Exchange Release 25.10.2022 9:40 EEST

UPM-Kymmene Corporation        Stock Exchange Release (Interim Report)        25 October 2022 at 09:40 EEST

UPM Interim Report Q3 2022:
UPM delivers all-time high quarterly results with excellent performance in all businesses

Q3 highlights

  • Sales increased by 36% to EUR 3,420 million (2,523 million in Q3 2021)
  • Comparable EBIT grew by 84% to EUR 779 million, 22.8% of sales (424 million, 16.8%)
  • Operating cash flow was EUR -201 million (318 million), impacted by cash flow from energy hedges. Other operating cash flows were largely as expected
  • The rise in energy futures prices continued, causing short-term cash outflow impact from energy hedges. Respectively, it indicates the strong earnings potential of UPM Energy
  • Sales prices increased in all business areas and more than offset the negative impact of higher variable costs
  • Cash funds and unused committed credit facilities totalled EUR 5.2 billion at the end of Q3 2022. UPM signed EUR 4.3 billion of credit facilities during Q3
  • In August, EcoVadis recognised UPM on Platinum level based on the company’s sustainability performance
  • In September, UPM Raflatac completed the acquisition of AMC AG
  • In October, the new deep sea pulp terminal in the port of Montevideo in Uruguay was inaugurated

Q1–Q3 highlights

  • Sales increased by 19% to EUR 8,489 million (7,141 million in Q1–Q3 2021)
  • Comparable EBIT increased by 43% to EUR 1,443 million (1,010 million), and was 17.0% (14.1%) of sales
  • Operating cash flow was EUR -1,068 million (844 million), impacted by cash flows from energy hedges in the highly exceptional energy markets
  • Net debt increased to EUR 3,133 million (667 million) and the net debt to EBITDA ratio was 1.39 (0.38). A significant part of the increase in net debt is temporary, due to the cash flow impacts of energy hedges and future energy generation
  • UPM decided to suspend its deliveries to Russia, the purchasing of wood in Russia and the UPM Chudovo plywood mill operations
  • The strike in Finland affected production and delivery volumes in the early part of the year. Estimated full-year earnings impact is not material
  • In April, UPM and the Paperworkers’ Union agreed on the first-ever business-specific collective labour agreements
  • In June, UPM announced the sale of the Steyrermühl site in Austria to secure competitiveness and adapt newsprint production to long-term market development

Key figures

Sales, EURm        3,420        2,523        2,562        8,489        7,141        9,814
Comparable EBITDA, EURm        894        535        506        1,777        1,351        1,821
% of sales        26.1        21.2        19.7        20.9        18.9        18.6
Operating profit, EURm        781        564        335        1,299        1,147        1,562
Comparable EBIT, EURm        779        424        387        1,443        1,010        1,471
% of sales        22.8        16.8        15.1        17.0        14.1        15.0
Profit before tax, EURm        766        558        361        1,306        1,128        1,548
Comparable profit before tax, EURm        764        418        413        1,449        991        1,457
Profit for the period, EURm        622        497        292        1,053        968        1,307
Comparable profit for the period, EURm        629        359        329        1,190        832        1,204
Earnings per share (EPS), EUR        1.15        0.92        0.53        1.93        1.78        2.41
Comparable EPS, EUR        1.16        0.66        0.60        2.18        1.53        2.22
Return on equity (ROE), %        21.1        19.9        10.5        12.0        12.9        12.7
Comparable ROE, %        21.3        14.3        11.8        13.6        11.1        11.7
Return on capital employed (ROCE), %        18.7        17.9        10.0        11.4        12.5        12.4
Comparable ROCE, %        18.6        13.4        11.5        12.6        11.0        11.7
Operating cash flow, EURm        -201        318        -879        -1,068        844        1,250
Operating cash flow per share, EUR        -0.38        0.60        -1.65        -2.00        1.58        2.34
Equity per share at the end of period, EUR        22.35        19.08        20.57        22.35        19.08        20.34
Capital employed at the end of period, EURm        18,052        13,039        15,637        18,052        13,039        13,759
Net debt at the end of period, EURm        3,133        667        2,688        3,133        667        647
Net debt to EBITDA (last 12 months)        1.39        0.38        1.42        1.39        0.38        0.35
Personnel at the end of period        17,289        17,085        17,601        17,289        17,085        16,966

Jussi Pesonen, President and CEO, comments on the Q3 results:

“UPM reached all-time high quarterly results in Q3. The strength of our operating model was on full display as we simultaneously delivered record quarterly results in UPM Communication Papers, UPM Specialty Papers, UPM Raflatac, UPM Energy and UPM Biofuels. UPM Fibres and UPM Plywood achieved strong results, too. All in all, Q3 was a great success considering the highly uncertain and volatile business environment.

Good demand continued in most of our businesses, and sales prices more than offset the impact of continued increases in variable costs. Delivery volumes were back to normal after the exceptional H1 and operational efficiency was on a good level. No major downside risks materialised during the quarter.

Our sales grew by 36% to EUR 3,420 million (Q3 2021: 2,523 million), and comparable EBIT grew by 84% to EUR 779 million (424 million). As in the previous quarter, cash flows related to energy hedges affected operating cash flow significantly, resulting in an operating cash flow of EUR -201 million. Due to the nature of our hedging, this cash flow is expected to reverse in the future.

Our financial position remains strong, with cash funds and unused committed credit facilities totalling EUR 5.2 billion at the end of Q3. Net debt to EBITDA ratio was on a healthy level at 1.39. This gives us a solid base to navigate the unpredictable operating environment.

The quarter was clearly characterised by the energy crisis in Europe. Energy prices and volatility in the markets reached unprecedented levels. Market price signals are crucially important both for the energy system as a whole and for steering UPM’s energy production and consumption. We continuously optimise our electricity consumption towards hours when the prices and society’s energy needs are at their lowest, whereas we increase hydropower generation when energy needs are highest. Consequently, we help balance the electricity market, particularly in Finland. At the same time, all this is a significant source of value creation and competitive advantage both in our energy business and in our energy-consuming businesses.

UPM Energy achieved record earnings, benefiting from high market prices, optimised hydropower generation on the volatile markets, and the first notable generation volumes from the OL3 nuclear power plant unit.

UPM Fibres achieved an excellent quarterly result with continued solid demand and high prices for pulp. Our timber business, however, was affected by a visible slowdown in construction end-uses.

In UPM Communication Papers the excellent earnings level is a remarkable achievement. The business has faced a radical rise in input costs, particularly in energy and fibres, but they have been successfully offset by sales prices. The business has been very determined in adopting a more agile operating mode in the highly uncertain markets.

UPM Specialty Papers delivered all-time high quarterly results despite historically high-priced raw materials. The market for release liners and packaging papers remained strong. Asian fine paper markets continued to be challenging.

Favourable market conditions continued for UPM Raflatac. Customer demand for labels remained good, and the business performed extremely well. The acquisition of AMC AG in Germany was completed in September, accelerating growth and widening the product portfolio.

UPM Plywood had a good quarter despite slowing demand in construction end-uses. Sales prices increased for most products.

In Other operations, UPM Biofuels achieved record production and profitability in the strong markets for renewable biofuels. Our strategy based on proprietary technology and UPM’s integrated feedstocks, supplying highly sustainable renewable fuels is truly delivering results.

Our pulp mill in Paso de los Toros, Uruguay, is expected to begin commercial production in Q1 2023 growing our pulp business by more than 50%. A significant milestone in the project was reached when the new pulp terminal in the port of Montevideo was inaugurated in October. Direct connections from the new pulp mill to the global markets play a key role in the competitiveness of our pulp business.

The testing period for the OL3 nuclear power plant unit continues. Once in commercial production, it will grow our energy business by almost 50%, providing much-needed emission-free electricity to the markets.

Our biochemicals refinery project in Leuna, Germany, is proceeding as planned. We are opening a new growth business for UPM, providing more sustainable solutions to replace fossil-based materials in numerous end-uses. The keen customer interest in our innovative biochemicals products is inspiring. Basic engineering continues for the potential biofuels refinery in Rotterdam, the Netherlands.

During the quarter, UPM received its all-time high score from EcoVadis, the leading rating agency for supply chain sustainability, and was yet again recognised on Platinum level. Only one percent of the 90,000 companies assessed receive the Platinum score. Sustainability is at the heart of UPM’s Biofore strategy focused on providing the world with sustainable, renewable materials for various end-uses and competitive zero-carbon electricity.

Looking ahead, the uncertainties in the business environment continue to be numerous, but UPM is well prepared to face them with high-performing businesses, an agile operating model and a strong balance sheet. In addition, our growth projects are nearing their start up phases, adding significant new earnings in the future. This year, we expect our annual earnings to reach new record highs.”

Outlook for 2022

UPM’s comparable EBIT is expected to increase in 2022 from 2021. Following the record strong Q3 2022 results, UPM’s financial performance is expected to continue above last year’s level.

Significant uncertainties remain in the outlook, related to the war in Ukraine, the remaining effects of the pandemic, growth in the European and global economy, energy prices, availability and related regulation in Europe, the start-up of the OL3 power plant unit, and the tight raw material and logistics markets.

Sales prices and variable costs are expected to be higher in H2 2022 than in H1 2022 in most of UPM businesses. UPM will continue to manage margins with product pricing, by optimising its product and market mix, through efficient use of assets as well as by taking measures to improve variable and fixed cost efficiency.

Invitation to UPM’s webcast and press conference on Q3 2022 Interim Report

A webcast and a conference call for analysts and investors in English language begins at 13:15 EEST. UPM’s interim report 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–September 2022
International telephone numbers:

Dial in number(s):
Berlin: +49 (0) 30 3001 90612
Amsterdam: +31 (0) 20 708 5073
Brüssel: +32 (0) 2 789 8603
Copenhagen: +45 3272 9273
Delhi: +91 (0) 11 7127 9295
Dublin: +353 (0) 1 436 0959
Helsinki: +358 9 2319 5437
Hong Kong: +852 5808 3370
Madrid: +34 91 787 0777
Mumbai: +91 (0) 22 7127 9293
New York: +1 212 999 6659
Oslo: +47 2 156 3318
Paris: +33 (0) 1 7037 7166
Rome: +39 06 83360400
Singapore: +65 6494 8889
Stockholm: +46 (0) 8 50520424
Sydney: +61 (0) 2 8014 9383
Tokyo: +81 (0) 3 5050 5366
UK: +44 (0) 33 0551 0200
Wien (Vienna): +43 (0) 12530807

No PIN is needed for participation in the teleconference. The caller must inform the teleoperator that she/he wants to join the UPM Q3 2022 Interim report teleconference and announce her/his name and the company she/he represents. 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, President and CEO Jussi Pesonen will present the Q3 results in a press conference held in the Finnish language both at the Biofore House and online. Those wishing to attend this event, please contact the UPM media desk.


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 EEST
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

Follow UPM on Twitter | LinkedIn | Facebook | YouTube | Instagram | #UPM #biofore #beyondfossils