jussi pesonen president and ceo 28 april 2010 · • comparison period included a wood inventory...

UPM Q1 RESULTS 2010

Jussi PesonenPresident and CEO

28 April 2010

2 | © UPM

Q1 2010 in brief

• Q1 sales grew by 10% from last year – demand is recovering- delivery volumes increased in all businesses

- sales prices decreased in publication papers, but increased in all other products during Q1

• Operating profit excluding special items EUR 116 million, operating cash flow EUR 209 million

• Uruguay operations were included for the first full quarter and contributed positively to the results

• Raw material markets (e.g. RCP and wood markets) have tightened and availability of fibre is a concern

• The estimated loss due to the Finnish stevedores' strike was about EUR 20 million, partly in Q1 and partly in Q2

3 | © UPM

-18%-23%+10%Sales growth (%)

22,840

209

0.15

116

-9

107

14.1

288

2,039

Q1/10

24,039

274

-0.27

-78

-17

-95

6.9

128

1,857

Q1/09

23,213

1,259

0.11

270

-135

135

13.8

1,062

7,719

2009

Net cash generated from operating activities, €m

Personnel at the end of period

Operating profit (loss), excl. special items, €m

EPS excl. special items, €

Sales, €m

% of sales

EBITDA, €m

Special items included in operating profit, net

Operating profit (loss), €m

FINANCIALSKey financials

4 | © UPM

FINANCIALSEBITDA development in Q1 2010 vs. Q1 2009Paper weaker, all other businesses improved

0

50

100

150

200

250

300

350

EBITDAQ109

EBITDAQ110

€ million

1286.9%

Pulp

Forest and

timberLabel Other

operations

Paper

28814.1%

Energy

Plywood

5 | © UPM

FINANCIALSEBITDA development in Q1 2010 vs. Q1 200910% higher sales on same fixed costs

0

50

100

150

200

250

300

350

EBITDAQ109

EBITDAQ110

€ million

1286.9%

Prices, currency

Wood costs

Energy costs

Otheritems

Fixed costs

28814.1%

Wood inventory write down in Q1 2009

Delivery volumesand inclusion of

Uruguay

6 | © UPM

-100

-50

0

50

100

150

200

250

300

Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110

FINANCIALS

Operating profit improved, butprofitability remains unsatisfactory

€ million

1165.7%

-78-4.2%

1887.8%

UPM's operating profit excluding special items

2218.8%

7 | © UPM

450

550

650

750

850

2006 2007 2008 2009 2010300

400

500

600

700

WFU PIX BHKP

WFU €/ton

Source: FOEX Indexes Ltd., PPI, RISI

400

450

500

550

600

2006 2007 2008 2009 2010

0

50

100

150

200

News 45 g/m² RCP

FINANCIALS

Increasing pulp and RCP prices are squeezing paper makers' margins

WFU

RCP

NewsprintBHKP

Hardwood pulp (BHKP) €/ton Newsprint €/ton RCP (ONP) €/ton

8 | © UPM

FINANCIALSCash flow

169

9

160

-49

209

-23

-18

250

288

Q1/10

210

14

196

-78

274

-73

216

131

128

Q1/09

1,045

22

1,023

-236

1,259

-214

532

941

1,062

2009

Asset sales and acquisitions

Cash flow after investing activities

Capital expenditure

Cash flow after capex

Net cash from operating activities

Change in working capital

EBITDA

Cash flow before change in working capital

Finance costs and income taxes

€, million

9 | © UPM

3 000

3 500

4 000

4 500

5 000

04 05 06 07 08 09 Q110

5456

0

20

40

60

80

100

120

04 05 06 07 08 09 Q110

Gearing ratiodecreased by 2pp

Net debtdecreased by EUR 161m

% € million

Target: maximum 90%

FINANCIALS Balance sheet strengthened

Liquidity remained at EUR 2.2bnrepayments less than €0.6bn in 2010-11

3 7303 569

10 | © UPM

Outlook for 2010 (*

• Gradual recovery in demand to continue in consumer goods and graphic papers. Pick up expected also for construction materials

• Positive development in delivery volumes is expected to continuein most of our businesses

• In paper, sales prices in euro are estimated to be higher duringQ2 2010 and target is to increase prices in all new contracts

• Raw material markets have tightened. Variable costs are expected to increase by about 2% from last year

• Operating profit excluding special items for 2010 is expected toclearly improve from last year

(* See complete wording of the "Outlook" in the Interim Report for Q1 2010

11 | © UPM

Summary

• Sales grew by 10%

• Fixed costs flat

• WOC nearly flat

• Balance sheet continued to strengthen

• Demand recovery continues

• Sales prices have bottomed

• Pressure in raw material prices

12 | © UPM

UPM assets – good cash flow with a long lifetime

• Strong and versatile energy portfolio providing cost competitiveenergy

• Four modern pulp mills with total capacity of 3.2 million tons, of which 1.1 million tons in Uruguay

• Own forests and plantations provide up to 25 % of fibre

• Modern and cost competitive paper capacity. Changshu mill in the middle of fast growing markets

• Label has a global, modern manufacturing and delivery platform and strong market positions

• Plywood, after restructuring, cost competitive production

• Strong balance sheet and good cash flow

BUSINESS DRIVERS

14 | © UPM

-9,0

-7,4

-5,9

-4,3

-2,8

-1,2

0,3

1,9

3,4

5,0

6,6

8,1

9,7

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

BUSINESS DRIVERSEconomic indicators have improved and recovery has started in demand for UPM's products

Paper demand growth (%, trailing 3 month)

Sources: Cepiprint, Cepifine, OECD

Euro zone composite leading indicator

Graphic paper demand growth

Euro zone composite leading indicator

15 | © UPM

8 000

8 500

9 000

9 500

10 000

10 500

11 000

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Source: Cepiprint/fine, PPPC

Graphic papers demand in Europe +3%

Magazine and WFC papers demand in North America +13%

13%

3%

BUSINESS DRIVERSGraphic papers demand

'000 tonnes '000 tonnes

16 | © UPM

300

400

500

600

700

800

900

'03 '04 '05 '06 '07 '08 '09 '10

News 45 g/m² SC rg 56 g/m²

LWC off 60 g/m² WFCr 100 g/m²

WFUr 80 g/m²

€/tEurope

400

500

600

700

800

900

1000

1100

1200

1300

'03 '04 '05 '06 '07 '08 '09 '10

News 48,8 g/m² SC 51,8 g/m²

LWC 59,2 g/m² WFCr 88,8 g/m²

WFUr off 74 g/m²

USD/t

400

500

600

700

800

900

1000

1100

1200

1300

'03 '04 '05 '06 '07 '08 '09 1Q

WFU s 80-120 g WFC s 128-157 g

USD/tChinaNorth America

imported

domestic

Source: PPI, RISI

BUSINESS DRIVERSGraphic paper prices

17 | © UPM

300

400

500

600

700

800

900

1 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

PIX NBSK PIX BHKP

BUSINESS DRIVERSChemical pulp market price

USD/ton

(Northern Bleached Softwood Kraft)

Source: FOEX Indexes Ltd.

(Northern Bleached Hardwood Kraft)

USD 929/t

USD 840/t

18 | © UPM

10

11

12

13

14

15

16

17

18

19

20

2004 2005 2006 2007 2008 2009 2010

BUSINESS DRIVERS Wood prices still at a high level

Fibre wood prices in Finland, € / m³

Source: Metla

Birch

Pine

+15%

FINANCIALS

20 | © UPM

0

200

400

600

800

1 000

1 200

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

-202

6

2027

2028

2029

2030

Committed Facilities Loans

• Liquidity on 31 March 2010 was € 2.2bn- cash € 365 million and unused credit facilities € 1.875 bn

FINANCIALSMaturity profile

€ million

21 | © UPM

0

200

400

600

800

1 000

05 06 07 08 09 10e

FINANCIALS Capital expenditure and estimate for 2010

€ million

Depreciation excl. amortization of goodwill

Strategic investments

Operational investments

Estimate

Uruguay and PVO acquisitions

300

760

229

761

22 | © UPM

FINANCIALS Q1 EBITDA:Paper weaker, all other businesses improved

-50

0

50

100

150

200

250

300

350

79

120

331

-2 -18

288

€ millionUPMtotal

Energy Pulp Forest and

timber

Paper Label Plywood Other operations

Q1 2010Q1 2009

75

EBITDA by business area Q1 2010 vs. Q1 2009

23 | © UPM

50

60

70

80

90

100

110

2007 2008 2009 2010

Publication papers Fine and speciality papers

Sawn timber Plywood

FINANCIALS Deliveries increased in all businesses from last year

Delivery volumes, indexed Q107 = 100 Change in deliveries from last year

-11+88(*Pulp

-30+2Sawn timber

Label

-20+5Publication papers

-30

-6

2009

+29Fine and speciality papers

+5Plywood

Q1/10%

*) acquired Fray Bentos pulp millincluded from Dec 2009

24 | © UPM

FINANCIALSEnergy Q1 2010 vs. Q1 2009

• Average sales price for electricity increased by 36%

• external sales was higher

• Due to higher market prices, 29% lower hydropower volume was partly compensated with higher condensing power generation

0

20

40

60

80

100

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

€, million

51

81

37.5%

46.6%

2.4

36%

81

174

Q1/10

2.5

40%

51

136

Q1/09

Average price, change %

Electricity sales, TWh

Operating profit M€excl. special items

Sales, M€

Operating profit excluding special items

25 | © UPM

FINANCIALSPulp Q1 2010 vs. Q1 2009

• Uruguay operations were included in the Pulp business area as of December 2009

• Operating profit improved due to significantly higher average pulp price

• Wood costs were lower

• Comparison period included a wood inventory write-down of € 28 million and a pulp inventory write-down of € 10 million

-100

-80

-60

-40

-20

0

20

40

60

80

100

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

8424.6%

700

84

341

Q1/10

372Pulp deliveries, 1,000 t

-93Operating profit M€excl. special items

139Sales, M€

Q1/09

Associated company Metsä-Botnia

€, million Operating profit excluding special items

-93-66.9%

26 | © UPM

FINANCIALSForest and timber Q1 2010 vs. Q1 2009

-60

-40

-20

0

20

40

60

80

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

-8

19

-2.1%

5.6%

1119Fair value change of biological assets

371

14%

19

339

Q1/10

363Sawn timber deliveries, 1,000 m3

-21%Average price of sawn timber, change %


385Sales, M€

Q1/09

• Sawn timber average sales price increased by 14%

• Increase in the fair value of biological assets net of wood harvested was € 19 million

Fair value change of biological assets


27 | © UPM

FINANCIALSPaper Q1 2010 vs. Q1 2009

-80

-60

-40

-20

0

20

40

60

80

100

120

140

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

37

-61

2.7%

-4.4%

• Average paper price decreased by 10%

• Cost of fibre increased

• Delivery volumes increased 13%

• delivery growth especially in Asia, in North America and speciality papers

2,301

-10%

-61

1,401

Q1/10

2,028Paper deliveries, 1,000 t

4%Average price, change %

37Operating profit M€excl. special items

1,367Sales, M€

Q1/09


28 | © UPM

• Operating profit increased due lower raw material costs and higher delivery volumes

• Delivery volumes increased in all regions, especially in Asia and Eastern Europe

• The average sales price for label materials in local currencies decreased marginally from last year but increased from Q4

FINANCIALSLabel Q1 2010 vs. Q1 2009

-10

0

10

20

30

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

-3

23

-1.3%

8.8%


260

Q1/10

223Sales, M€

Q1/09


29 | © UPM

FINANCIALSPlywood Q1 2010 vs. Q1 2009

• Operating loss decreased due to lower production costs

• Sales price was lower

• The comparison period included a wood inventory write-down of € 15 million

-30

-20

-10

0

10

20

30

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

-28

-7

-37.3%

-9.2%

140

-7

76

Q1/10

133Plywood deliveries, 1,000 m³


75Sales, M€

Q1/09


30 | © UPM

jussi pesonen president and ceo 28 april 2010 · • comparison period included a wood inventory...

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