upm q2 results 2014 - wms-cornelius - advanced...

Jussi Pesonen

President and CEO

5 August 2014

UPM Q2 RESULTS 2014

| © UPM

Sales

EUR 2,441m -3%

EBITDA

EUR 298m +40m

Successful profit improvement programme

prompted strong Q2 2014 results

Operating cash flow

EUR 479m +292m

Net debt

EUR 2,925m -599m

(* excluding special items2

Operating profit (*

EUR 186m +48m

Profit before tax (*

EUR 169m +49m Gearing

40% -8pp

Net debt / EBITDA

2.4x -0.6x

Q2 2014 vs. Q2 2013:

EPS (*

EUR 0.26 +0.06

Operating profit (*

EUR 382m +100m

H1 2014 vs. H1 2013:

| © UPM

Profit improvement programme

progressing fast

0

50

100

150

200

250

Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115

3

EUR million

Full impact of the programme is expected by the end

of 2014 as compared with the Q2/13 results

94%

achieved

in Q2/14EUR 200m of

annualised

fixed and

variable cost

savings

| © UPM

0

100

200

300

400

500

600

700

800

EBITDA

H1/13

EBITDA

H1/14

EBITDA in H1 2014 vs. H1 2013

Raflatac

Paper

Asia

Other

operations

and

eliminationsEnergy

Biorefining

Paper

ENA Plywood

0

100

200

300

400

500

600

700

800

EBITDA

H1/13

EBITDA

H1/14

EUR million

Prices,

currencies

Variable

costs

Fixed

costs

Deliveries

Significant cost savings

Currencies, pulp and paper prices

had a negative impact EUR million

Significant improvement in UPM Paper ENA

and UPM Plywood, UPM Biorefining lower

due to pulp price, maintenance

4

Elimin.

54210.9%

61112.4%

54210.9%

61112.4%

| © UPM

Operating profit *) by business area

5

0

2

4

6

8

10

0

10

20

30

40

50

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

0

4

8

12

16

20

0

20

40

60

80

100

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

0

10

20

30

40

50

0

20

40

60

80

100

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

0

2

4

6

8

10

0

10

20

30

40

50

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

-4

-2

0

2

4

6

-40

-20

0

20

40

60

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

-3

0

3

6

9

12

-5

0

5

10

15

20

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

EURm % of salesUPM Paper Asia EURm % of salesUPM Paper ENA EURm % of salesUPM Plywood

EURm % of salesUPM RaflatacEURm % of salesUPM EnergyEURm % of salesUPM Biorefining

*) excluding special items

| © UPM

Strong cash flow

6

0

200

400

600

800

1 000

1 200

1 400

Q10

8

Q30

8

Q10

9

Q30

9

Q11

0

Q31

0

Q11

1

Q31

1

Q11

2

Q31

2

Q11

3

Q31

3

Q11

4

Operating cash flow

Cash flow

after investing

activities

EUR million Cash flow, trailing 12 months

• Q2 2014 operating cash

flow was EUR 215m

(84m)

• Last 12 months’ operating

cash flow was EUR 1,027m

(867m)

| © UPM

Strengthening balance sheet

7

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

2008

2009

2010

2011

2012

2013

2014

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

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

Net debt

Net debt / EBITDA

2.4

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

2008

2009

2010

2011

2012

2013

2014

20

30

40

50

60

70

80

90

Net debt, EUR million Gearing %

Net debt

Gearing

40

Liquidity was EUR 1.8bn at the end of Q2 2014

Repayments total EUR 0.5bn in 2014

| © UPM

UPM business outlook is broadly stable *)

*) See complete wording of the "Outlook"

in the Q2 2014 interim report

• In H2 2014, UPM’s performance is expected to be underpinned by similar or slightly better performance in UPM Paper ENA, UPM Paper Asia, UPM Raflatac, UPM Plywood and UPM Energy, when compared to H2 2013.

• UPM Biorefining performance in H2 2014 compared to H2 2013 continues to be impacted by lower chemical pulp prices.

• Commercial production of renewable diesel at the Lappeenranta biorefinery is expected to start during the autumn 2014. The impact on UPM Biorefining earnings is expected to be minor during H2 2014.

| © UPM8

| © UPM

Growth projects

Lappeenranta biorefinery nearing its start

• Sales agreement with NEOT signed

in June

• Construction of the biorefinery was

completed in July

• Testing and commissioning process

is ongoing

• Commercial production of renewable

diesel is expected to start during the

autumn

• Earnings impact is expected to be

minor during H2 2014

9

| © UPM

Growth projects

10% expansion in pulp production capacity

• Pietarsaari pulp mill modernisation

and 70,000t expansion completed in

June

• Kymi pulp mill 170,000t expansion

proceeding on schedule, start-up by

the end of 2015

• Fray Bentos pulp mill received an

increased production permit, allowing

a further 100,000t of production. Minor

investments are planned for H2/14

• Further debottlenecking potential at

the Kaukas pulp mill

10

| © UPM

Growth projects

Growth in developing markets

• Investment in labelling materials and

woodfree speciality papers at the

UPM Changshu mill in China,

capacity of 360,000t, start-up by the

end of 2015

• 50% increase in self-adhesive

labelstock coating capacity in APAC,

start-up by the end of 2014

• Expansion of filmic labelstock

production in Nowa Wies, Poland,

start-up in Q1 2015

11

| © UPM

Low investment needs in existing assets allow

growth projects with modest total capex

12

0

200

400

600

800

1 000

1 200

2008 2009 2010 2011 2012 2013 2014e

EUR million

Operational investments

329

Capital expenditure

Strategic investments

Depreciation

Uruguay

acquisition

Myllykoski

acquisition

450

Estimate

| © UPM

Summary

• Strong Q2 2014 results thanks to fast implementation

of the profit improvement programme

• Strong cash flow and further strengthening balance

sheet

• Solid progress in growth projects

13

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

14

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses

FINANCIALS Q2 2014

| © UPM

Q2 2014 key figures

EUR million Q2

2014

Q2

2013

Q1

2014

H1

2014

H1

2013

2013

Sales 2,441 2,520 2,481 4,922 4,994 10,054

EBITDA 298 258 313 611 542 1,155

% of sales 12.2 10.2 12.6 12.4 10.9 11.5

Operating profit *) 186 146 196 382 282 683

Profit before tax *) 169 120 176 345 249 610

Earnings per share,

EUR *)

0.26 0.20 0.27 0.53 0.38 0.91

Operating cash flow 215 84 264 479 187 735

Net debt 2,925 3,524 2,777 2,925 3,524 3,040

Gearing % 40 48 37 40 48 41

17


| © UPM

Cash flow

EUR million Q2/14 Q2/13 Q1/14 H1/14 H1/13 2013

EBITDA 298 258 313 611 542 1,155

Cash flow before change in working capital

279 268 297 576 502 1,085

Change in working capital -36 -119 1 -35 -215 -128

Finance costs and income taxes -28 -65 -34 -62 -100 -222

Net cash from operating activities 215 84 264 479 187 735

Capital expenditure -106 -69 -68 -174 -167 -337

Asset sales and acquisitions 1 -29 69 70 -36 40

Cash flow after investing activities 110 -14 265 375 -16 438

18

| © UPM

Maturity profile and liquidity

19

0

100

200

300

400

500

600

700

800

900

1 000

2014

2015

2016

2017

2018

2019

2020-2

026

2027

2028

2029

2030

EUR million

0

100

200

300

400

500

600

700

800

900

1 000

2014

2015

2016

2017

2018

2019

2020-2

026

2027

2028

2029

2030

EUR million

Liquidity

Liquidity on 30 June 2014 was EUR 1.8bn

(cash and unused credit facilities)

• syndicated credit facility EUR 500 million

• bilateral committed credit facilities EUR 525 million

Committed credit facilities EUR 1.025bn

Maturity profile of outstanding debt Committed credit facilities’ maturities

| © UPM

UPM Biorefining Q2 2014 vs. Q2 2013

20

0

20

40

60

80

100

Q1 12

Q2 12

Q3 12

Q4 12

Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

Q2 14

0

4

8

12

16

20

Q2 2014 477Q2 2013 512

SalesEUR million

-66Q2 2014 31Q2 2013 97

Operating profit excluding special items

EUR million

Operating profitEUR million*)


EURmillion

% of salesBusiness performance

• Operating profit decreased mainly due

to lower hardwood pulp prices, partly

due to adverse currency impact, the

scheduled maintenance shutdown at

the UPM Pietarsaari pulp mill and a

prolonged start-up at the UPM Kaukas

pulp mill following its maintenance

shutdown.

• Pulp deliveries increased by 7% to

832,000 tonnes (774,000).

-7%

| © UPM

UPM Energy Q2 2014 vs. Q2 2013

21

0

20

40

60

80

100

Q1 12

Q2 12

Q3 12

Q4 12

Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

Q2 14

0

10

20

30

40

50

Q2 2014 112Q2 2013 110

SalesEUR million

Q2 2014 46Q2 2013 46




EURmillion

Business performance

• Operating profit remained on last

year’s level as the decrease in costs

offset the impact of lower average

sales prices.

• The average electricity sales price

decreased by 1% to EUR 44.5/MWh

(45.0/MWh).

EUR million % of sales

2%

| © UPM

UPM Raflatac Q2 2014 vs. Q2 2013

22

0

10

20

30

40

50

Q1 12

Q2 12

Q3 12

Q4 12

Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

Q2 14

0

2

4

6

8

10

Q2 2014 306Q2 2013 309

SalesEUR million

Q2 2014 17Q2 2013 19



EURmillion


• Operating profit decreased due to

temporary operational issues and

currency impact. Lower fixed costs and

higher delivery volumes offset the

negative sales margin impact.



-1% -2

| © UPM

UPM Paper Asia Q2 2014 vs. Q2 2013

23

0

10

20

30

40

50

Q1 12

Q2 12

Q3 12

Q4 12

Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

Q2 14

0

3

6

9

12

15

Q2 2014 285Q2 2013 289

SalesEUR million

Q2 2014 27Q2 2013 22




EURmillion


• Operating profit increased mainly due

to lower variable and fixed costs.

Average sales prices were lower mainly

due to negative currency impact.

5


-1%

| © UPM

UPM Paper ENA Q2 2014 vs. Q2 2013

24

-40

-20

0

20

40

60

Q1 12

Q2 12

Q3 12

Q4 12

Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

Q2 14

-4

-2

0

2

4

6

Q2 2014 1,286Q2 2013 1,358

SalesEUR million

70Q2 2014 47Q2 2013 -23




EURmillion

-5%


• Operating profit increased due to lower

variable and fixed costs, to a large extent

driven by the ongoing profit improvement

programme.

• The average price for all paper deliveries in

euros was approximately 1% lower than

last year.

• Paper deliveries decreased by 4% to

2,098,000 tonnes (2,181,000).


| © UPM

UPM Plywood Q2 2014 vs. Q2 2013

25

-5

0

5

10

15

20

Q1 12

Q2 12

Q3 12

Q4 12

Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

Q2 14

-3

0

3

6

9

12

Q2 2014 118Q2 2013 111

SalesEUR million

5Q2 2014 12Q2 2013 7



6%EUR

million


• Operating profit increased due to

improved sales margin resulting from

higher sales prices and lower variable

costs, as well as higher delivery

volumes.

• Deliveries increased by 4% to 199,000

cubic metres (191,000).



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