upm q1 results 2013assets.upm.com/investors/documents/2013/q12013_ceo_presentation... · upm q1...

Jussi Pesonen

President and CEO

25 April 2013

UPM Q1 RESULTS 2013

| © UPM

Q1 2013 highlights

Good performance continued in the growth businesses

• Normal performance in Pulp, successful hedging in Energy, stable

performance in Label

• Plywood and Timber improved in a challenging environment

Hard work continues in Paper

• Lower publication paper prices in Europe, adverse currency development,

lower delivery volumes

• Plan to reduce annual fixed costs by EUR 90 million proceeds

Operating profit excl. special items was EUR 144m (156m in Q1 2012)

• Fixed costs decreased by EUR 30m from last year

Operating cash flow was EUR 103m in Q1 2013 (218m in Q1 2012)

• Seasonal increase in working capital | © UPM 2

| © UPM

Q1 2013 key figures

EUR m Q1 2013 Q1 2012 Q4 2012 2012

Sales 2,474 2,608 2,657 10,492

sales growth, % -5% +4%

EBITDA 284 357 317 1,312

% of sales 11.5 13.7 11.9 12.5

Operating profit (* 144 156 146 556

Profit before tax (* 129 142 123 471

Earnings per share, EUR (* 0.18 0.22 0.20 0.74

Operating cash flow 103 218 361 1,040

Net debt 3,199 3,672 3,210 3,210

Gearing % 42 39 43 43

3

*) excluding special items

Historical figures restated

| © UPM

Second economic downturn in Europe

in four years

-7,5

-5,0

-2,5

0,0

2,5

5,0

7,5

10,0

4

Euro zone

US

BRIC

Real GDP growth, % yoy %

Source: Global Insight

| © UPM

50

60

70

80

90

100

110

120

2008 2009 2010 2011 2012 2013

Paper deliveries affected by the weak

economy

5

Delivery volumes, indexed Q108 = 100

Change in

deliveries, %

Q113/

Q112

Q113/

Q412

Label +2 -1

Pulp -11 +8

Publication papers

-7 -17

Fine and spec. papers

-4 +1

Timber -2 -2

Plywood +9 +10

| © UPM

0

50

100

150

200

250

300

350

400

EBITDA

Q1/12

EBITDA

Q1/13

EBITDA affected by lower paper prices and

delivery volumes in Q1 2013 vs. Q1 2012

Pulp

Paper

Other

Forest

and

Timber

Energy

Label

Plywood

0

50

100

150

200

250

300

350

400

EBITDA

Q1/12

EBITDA

Q1/13

EUR million

Prices,

currency

Fibre

costs Other

Fixed

costs

Deliveries

Energy

costs

Prices and volumes decreased

Savings in fixed costs

EUR million

Paper affected by

lower prices and volumes

6

357 13.7%

284 11.5%

357 13.7%

284 11.5%

| © UPM

Forest and Timber

-25 0 25 50 75 100 125 150 175

Q1 2013 EBITDA

Good performance in Pulp, Energy, Label

Challenges in Paper

Q1 2013 EUR 284m

Q4 2012 EUR 317m

Q1 2012 EUR 357m

Plywood

Label

Paper

Pulp

Energy

EURm

7

EBITDA

Other operations

Group total

| © UPM

Operating profit stable

-100

-50

0

50

100

150

200

250

300

Operating profit excluding special items

8

144 5.8%

156 6.0%

EUR million

| © UPM

Consistent solid cash flow

9

0

200

400

600

800

1 000

1 200

1 400

Q10

8

Q20

8

Q30

8

Q40

8

Q10

9

Q20

9

Q30

9

Q40

9

Q11

0

Q21

0

Q31

0

Q41

0

Q11

1

Q21

1

Q31

1

Q41

1

Q11

2

Q21

2

Q31

2

Q41

2

Q11

3

Operating cash flow

Cash flow

after investing

activities

EUR million Cash flow, trailing 12 months

• Q1 2013 operating cash

flow was EUR 103m (218m)

• Working capital increased

seasonally by EUR 96m in

Q1 2013 (14m)

| © UPM

Strong balance sheet

10

2 500

3 000

3 500

4 000

4 500

5 000

5 500

6 000

2008

2009

2010

2011

2012

2013

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

Net debt, EUR million Net debt / EBITDA (trailing 12 months)

Net debt

Net debt / EBITDA

2.6

2 500

3 000

3 500

4 000

4 500

5 000

5 500

6 000

2008

2009

2010

2011

2012

2013

20

30

40

50

60

70

80

90

Net debt, EUR million Gearing %

Net debt

Gearing

42

Liquidity was EUR 1.8bn at the end of Q1 2013

Repayments total EUR 228m in next 12 months 2012 figures restated

| © UPM

Outlook for 2013 unchanged (*

(* See complete wording of the "Outlook"

in the Interim Report Q1 2013

Business environment

• Economic growth in Europe in early 2013 is expected to remain very low, having a negative impact on the European graphic paper markets.

• Growth market economies are expected to fare better, which is supportive for the global pulp and label materials markets, paper markets in Asia and wood products markets outside Europe.

UPM performance in H1 2013 compared with H2 2012

• UPM’s performance will be underpinned by continued stable overall outlook for growth businesses such as Pulp, Energy and Label.

• Slightly lower publication paper prices, adverse currency development and lower delivery volumes are having a clear negative impact on the European paper business profitability.

| © UPM 11

| © UPM

Hard work in Paper continues

In Q1 2013, UPM’s fixed costs were EUR 30m lower than last year

• Final Myllykoski synergies, including mill closures

• Timber restructuring

Plan to reduce annual fixed costs by a further EUR 90m proceeds

• Two SC paper machines (total 420,000 tonnes) in Rauma, Finland, and in

Ettringen, Germany will be closed in April

• The sales processes of Docelles paper mill (160,000 tonnes), Pestovo

sawmill and Aigrefeuille further processing mill are ongoing

• Streamlining of functions is proceeding

12

| © UPM

UPM creates new business in

wood-based renewable diesel

Lappeenranta biorefinery status:

• Construction and commissioning works on-

going, on schedule and budget

• Main equipment installations will start in June

• Fleet tests of the product are about to start

• Recruitment of operative staff on-going

Total investment EUR 150m, start-up in

mid-2014

Investment supports the good profitability of

UPM’s growth businesses

Potential to grow into a significant new

business

13

| © UPM

UPM grows in China and in the fast

developing label materials segment

Changshu expansion status:

• Government and environmental permits are

clear

• Site preparation works on-going

• Infrastructure works under preparation

• Equipment tendering process on-going

• New sheeting line started up

Total investment CNY 3,000m (approx. EUR

390m), start-up by the end of 2014

Investment supports the good profitability of

UPM’s growth businesses

14

| © UPM

Summary

15

• Weak European economy continues to impact UPM’s business environment

• UPM’s growth businesses have continued good performance in the difficult environment

• Expansion continues with measured steps

• UPM proceeds with restructuring and streamlining in Paper

• Q1 2013 fixed costs were EUR 30m lower than last year

• The plan announced in January, targeting EUR 90m of annual fixed costs savings is proceeding on schedule

• The two SC paper machine closures are taking place in April

| © UPM

BUSINESS DRIVERS

| © UPM

-20

-15

-10

-5

0

5

10

15

20

-6,0

-3,0

0,0

3,0

6,0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Paper demand growth (% trailing 3 month)

Sources: Cepiprint, Cepifine, OECD

Euro zone composite leading indicator* (Y/Y %)

Graphic paper demand growth

Second economic downturn in Europe in four years

Euro zone composite leading indicator

* Changed GDP base

18

| © UPM

19

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Q1 0

9

Q3 0

9

Q1 1

0

Q3 1

0

Q1 1

1

Q3 1

1

Q1 1

2

3Q

12

Q1 1

3

Source: Cepiprint/fine, PPPC

Fine papers demand

in Europe -6% in Q1 2013

-6%

Graphic papers demand in Europe decreased

5% in Q1 2013

'000 tonnes

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Q1

09

Q3

09Q

1 10

Q3

10

Q1

11Q

3 11

Q1

12Q

3 12

Q1

13

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Q1 0

9

Q3 0

9

Q1 1

0

Q3 1

0

Q1 1

1

Q3 1

1

Q1 1

2

Q3 1

2

Q1 1

3

Newsprint demand


Magazine papers demand


-6% -3%

| © UPM

Overcapacity in European graphic paper

is visible in margins

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

20

Cash cost of a marginal producer

Price

Price hardly covers the cash costs of marginal producers EUR/t

Source: PPI, RISI, Pöyry

| © UPM

21 21

300

400

500

600

700

800

900

1000

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

News SC LWC

WFC WFU

EUR/t

Europe

400

500

600

700

800

900

1000

1100

1200

1300

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13News SC LWC WFC WFU

USD/t USD/t

China North America

Source: PPI, RISI

Graphic paper prices

400

500

600

700

800

900

1000

1100

1200

WFC freesheet, 128-157 g

WFU sheet ,10-30% virgin fiber

WFU sheet, 100% virgin fiber

| © UPM

Chemical pulp market

22

Source: PPPC World-20 statistics

Producer inventories

at balanced levels Days of

supply

300

400

500

600

700

800

900

1 000

1 100

2008 2009 2010 2011 2012 2013

USD/tonne

Q1 pulp prices increased slightly from Q4

Q1 BHKP pulp price above last year

BHKP

NBSK

Hardwood

inventories

Softwood

inventories

Source: FOEX Indexes Ltd.

15

20

25

30

35

40

45

50

55

60

65

2008 2009 2010 2011 2012 2013

| © UPM

Wood, RCP and electricity prices

23

60

80

100

120

140

160

180

10

12

14

16

18

20

22

24

26

2008

2009

2010

2011

2012

2013

Spruce Pine Birch

EUR / m³ Log prices in Finland EUR / m³ Pulpwood prices in Finland

Source: Metla, FOEX Indexes Ltd, NordPool, EEX

EUR / tonne RCP prices in Europe

30

35

40

45

50

55

60

65

70

Spruce Pine Birch

0

10

20

30

40

50

60

70

80

90

100

EEX (Germany) NordPool (Nordic)

Electricity 1-year forward prices EUR / MWh

FINANCIALS Q1 2013

| © UPM

Asset values changed to reflect fair values

0

1 000

2 000

3 000

4 000

5 000

6 000

Energy Pulp Fortim Paper Label Plywood Other

Energy assets

booked at fair

value in Q1/2013

Paper assets

impaired in Q4/2012

to reflect the current

profitability estimates

EUR million Capital employed

25

| © UPM

New asset values represent UPM’s EBITDA

generation during recent years

Capital employed

31 March 2013

Forest and

Timber 15%

Pulp 22%

Energy

25%

Label 5%

Plywood 2%

Paper

29%

Other 2%

Cumulative

EBITDA 2010 – 2012

Forest and Timber 2%

Pulp 41%

Energy 16%

Label 8%

Plywood 1%

Paper 33%

26

| © UPM

Adjusting operations to the profitable demand Planned actions subject to employee negotiations

Planned capacity closures

and other actions

Capacity t/a and

paper grade

Reduction in

personnel

Timeline

Permanent closure of the UPM Ettringen PM4

in Germany

175,000

SC

155 In April 2013

Permanent closure of the UPM Rauma PM3

in Finland

245,000

SC

90 In April 2013

Sale of the UPM Docelles mill in France

or other exit from UPM Paper business

160,000

Fine

165 Sales process

6 months

Streamlining of Paper BG and global functions 450 End 2013

Total planned actions 580,000 860

UPM Stracel production ceased 270,000

Coated magazine

250 January 2013

Total 850,000 1,110

Estimated annual fixed cost savings of EUR 90m

27

| © UPM

Capex focused on growth businesses – low

investment needs to maintain existing assets

28

0

200

400

600

800

1 000

1 200

06 07 08 09 10 11 12 13e

EUR million

Operational investments

350

Capital expenditure

Strategic investments

Depreciation

Uruguay

acquisition

Estimate

Myllykoski

acquisition

340 500

Projects in

2013

Biofuels

China PM

Schongau

CHP

Low

investments

in mature

businesses

| © UPM

EBITDA

0,0

4,0

8,0

12,0

16,0

20,0

0

100

200

300

400

500

EUR million EBITDA % of sales

29

284 11.5%

379 16.1%

288 14.1%

128 6.9%

337 14.0%

357 13.7%

| © UPM

Forest and Timber

-25 0 25 50 75 100 125 150 175

Q1 2013 EBITDA by business area

Q1 2013 EUR 284m

Q4 2012 EUR 317m

Q1 2012 EUR 357m

Plywood

Label

Paper

Pulp

Energy

EURm

30

EBITDA

Other operations

Group total

| © UPM

Operating profit

-6

-4

-2

0

2

4

6

8

10

-100

-50

0

50

100

150

200

250

300


31

144 5.8%

156 6.0%

198 8.4%

116 5.7%

-78 -4.2%

EUR million % of sales

188 7.8%

| © UPM

Forest and Timber

-25 0 25 50 75 100

Q1 2013 operating profit excluding special items

by business area

Q1 2013 EUR 144m

Q4 2012 EUR 146m

Q1 2012 EUR 156m

Plywood

Label

Paper

Pulp

Energy

EURm

32


Other operations

Group total

| © UPM

Cash flow

EUR million Q1/13 Q1/12 2012 2011

EBITDA 284 357 1,312 1,383

Cash flow before change in working capital 234 277 1,156 1,249

Change in working capital -96 -14 34 -73

Finance costs and income taxes -35 -45 -150 -135

Net cash from operating activities 103 218 1,040 1,041

Capital expenditure -98 -88 -379 -286

Asset sales and acquisitions -7 -1 307 155

Cash flow after investing activities -2 129 968 910

33

| © UPM

Balance sheet

34

2 500

3 000

3 500

4 000

4 500

5 000

08 09 10 11 12 Q1 13

0

20

40

60

80

100

08 09 10 11 12 Q1 13

Gearing ratio

Net debt

% EUR million

Target: maximum 90%

3,199

42

| © UPM

Maturity profile and liquidity

35

0

100

200

300

400

500

600

700

800

900

1 000

2013

2014

2015

2016

2017

2018

2019-2

026

2027

2028

2029

2030

EUR million

0

100

200

300

400

500

600

700

800

900

1 000

2013

2014

2015

2016

2017

2018

2019-2

026

2027

2028

2029

2030

EUR million

Liquidity

Liquidity on 31 March 2013 was € 1.8bn

(cash and unused credit facilities)

• syndicated credit facility EUR 500 million

• bilateral committed credit facilities EUR 900 million

Committed credit facilities EUR 1.4bn

Maturity profile of outstanding debt Committed credit facilities’ maturities

| © UPM

Energy Q1 2013 vs. Q1 2012

36

0

20

40

60

80

100

120

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

0

10

20

30

40

50

60

Q1 2013 117 Q1 2012 145

Sales EUR million

-5 Q1 2013 58 Q1 2012 63


EUR million

Operating profit EUR million*)


EUR million

% of sales Business performance

• Operating profit decreased compared

with the same period last year mainly

due to a less favourable generation

mix with lower hydro and higher

condensing power volumes.

• The average electricity sales price

decreased by 1% to EUR 46.8/MWh.

-19%

| © UPM

Pulp Q1 2013 vs. Q1 2012

37

-100

-50

0

50

100

150

200

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

-30

-15

0

15

30

45

60

Q1 2013 407 Q1 2012 433

Sales EUR million

5 Q1 2013 80 Q1 2012 75



EUR million

EUR million % of sales Business performance

• Operating profit increased compared

with the same period last year. Higher

average pulp sales price offset the

negative impact of lower deliveries and

higher variable costs.

• Deliveries decreased by 11% to

790,000 tonnes.


-6%

| © UPM

Forest and Timber Q1 2013 vs. Q1 2012

38

-60

-40

-20

0

20

40

60

80

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

-15

-10

-5

0

5

10

15

20

Q1 2013 436 Q1 2012 426

Sales EUR million

Q1 2013 3 Q1 2012 2




EUR million

EUR million % of sales Business performance

• In sawn timber, cost efficiency

improved.

• The increase in the fair value of

biological assets net of wood harvested

was EUR 4 million (decrease of 1

million). The increase in the fair value of

biological assets (growing trees) was

EUR 17 million (16 million).

• The cost of wood harvested from own

forests was EUR 13 million (17 million).

Fair value change

2% 1

| © UPM

Paper Q1 2013 vs. Q1 2012

39

-100

-50

0

50

100

150

200

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

-6

-3

0

3

6

9

12

Q1 2013 1,641 Q1 2012 1,813

Sales EUR million

-17 Q1 2013 3 Q1 2012 20




EUR million


-9%

Business performance

• The average price for paper deliveries in

euros was approximately 4% lower than in

the previous year.

• The reduction in fixed costs and gains from

unrealised energy hedges offset the

negative impact of lower delivery volumes.

• Depreciation was lower than last year.

| © UPM

Label Q1 2013 vs. Q1 2012

40

-10

-5

0

5

10

15

20

25

30

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

-4

-2

0

2

4

6

8

10

12

Q1 2013 299 Q1 2012 298

Sales EUR million

-5 Q1 2013 18 Q1 2012 23




0% EUR

million


• Operating profit decreased due to higher

fixed costs. Expanded operations enabled

volume growth, while unit value added

decreased slightly.


| © UPM

Plywood Q1 2013 vs. Q1 2012

41

-40

-30

-20

-10

0

10

20

30

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

-40

-30

-20

-10

0

10

20

30

Q1 2013 108 Q1 2012 97

Sales EUR million

5 Q1 2013 4 Q1 2012 -1





11%


• Operating profit increased due to higher

delivery volumes.

• Deliveries increased by 9% to 186,000

cubic metres.

EUR million

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