upm results q4 2015upm results q4 2015 ... company’s earnings in 2016, compared with 2015. upm...
TRANSCRIPT
Jussi Pesonen
President and CEO
2 February 2016
UPM RESULTS Q4 2015
| © UPM
Q4 2015 – growth projects started to deliver,
record-strong balance sheet
Best quarterly EBITDA in five years: EUR 363m (334m)
+ Profit improvement programme exceeded its target by 10%, reaching
annualised cost reduction impact of EUR 165m
+ Growth projects started to contribute to earnings, with strong start at the
expanded UPM Kymi pulp mill and UPM Biofuels reaching break-even level.
UPM Changshu PM3 ramp-up started well in December
Operating profit excluding special items came to EUR 225m (230m)
Strong operating cash flow at EUR 390m (462m)
Net debt decreased to a new record-low of EUR 2,100m (2,401m)
Board proposes a dividend of EUR 0.75 (0.70) per share
2
| © UPM
Sales
EUR 2,574m +2%
EBITDA
EUR 363m +29m
Q4 2015 – growth projects started to deliver,
record-strong balance sheet
3
Operating profit (*
EUR 225m -5m
Profit before tax (*
EUR 219m +3m
Q4 2015 vs. Q4 2014:
EPS (*
EUR 0.37 +0.05 (* excluding special items.
2015 vs. 2014:
Net debt
EUR 2,100m -301m
Operating cash flow
EUR 1,185m -56m
Dividend proposal
EUR 0.75 0.05
Net debt / EBITDA
1.55x -0.28x
ROE (*
12.1% +3.8pp
| © UPM
Profit improvement programme exceeded its
targets both in fixed and variable costs
0
50
100
150
200
Q314 Q414 Q115 Q215 Q315 Q415
4
Variable cost
savings
Annualised cost reduction
impact of the programme
reached EUR 165m in Q4 15,
compared with Q3 14.
Fixed cost
savings from
closures (*
(* 800,000 tonnes of publication paper capacity in Europe:
four paper machines were closed in H1 15
EUR million
EUR 150m target
exceeded by 10%
| © UPM
0
50
100
150
200
250
300
350
400
450
EBITDA
Q4/14
EBITDA
Q4/15
EBITDA in Q4 2015 vs. Q4 2014
Raflatac
Paper
AsiaOther
operations
and
eliminations
Energy
Biorefining
Paper
ENA
Plywood
0
50
100
150
200
250
300
350
400
450
EBITDA
Q4/14
EBITDA
Q4/15
EURm
Prices
Variable
costs
Fixed
costs
Deliveries
Profit improvement actions and
favourable currencies outweighed
the decrease in sales prices EURm
Favourable pulp market, currencies and
costs benefited UPM Biorefining.
Increased pulp costs and currency hedges
impacted the paper businesses
5
33413.2%
36314.1%
Currency,
net
impact 33413.2%
36314.1%
| © UPM
Operating profit *) by business area
6
0
2,5
5
7,5
10
12,5
0
10
20
30
40
50
Q113
Q313
Q114
Q314
Q115
Q315
0
5
10
15
20
25
0
30
60
90
120
150
Q113
Q313
Q114
Q314
Q115
Q315
0
15
30
45
60
0
20
40
60
80
Q113
Q313
Q114
Q314
Q115
Q315
0
2
4
6
8
10
0
10
20
30
40
50
Q113
Q313
Q114
Q314
Q115
Q315
-4
-2
0
2
4
6
-50
-25
0
25
50
75
Q113
Q313
Q114
Q314
Q115
Q315
0
4
8
12
16
20
0
5
10
15
20
25
Q113
Q313
Q114
Q314
Q115
Q315
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
Business area returns and long-term targets
7
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22ROCE %ROCE % (* ROCE %ROCE % CF/CE % ROCE %
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
UPM
Raflatac
UPM
EnergyUPM
Biorefining
(* shareholdings in UPM Energy
valued at fair valueLong-term return target
| © UPM
Group profitability and targets
0
2
4
6
8
10
12
8
0
2
4
6
8
10
12
0
20
40
60
80
100
0
1 000
2 000
3 000
4 000
5 000
Operating profit excl. special items
ROEexcl. special items
Net Debt
Gearing
Max gearing
Min target
EURm %%% of sales Operating profit ROE Gearing
(* (*
(* the figures include the EUR 265 million increase in the fair value of
the forests in Finland in Q3 2015.
| © UPM
Strong cash flow
9
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
Q31
4
Q11
5
Q31
5
Operating cash flow
Cash flow
after investing
activities
EUR million Cash flow, trailing 12 months
• Q4 2015 operating cash
flow was EUR 390m
(462m)
• In Q4 2015, working capital
decreased by EUR 60m
(EUR 144m)
• In 2015, operating cash flow
was EUR 1,185m (1,241m),
EUR 2.22 per share (2.33)
| © UPM
Balance sheet continued to strengthen
10
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
2015
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
1.6
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
2015
20
30
40
50
60
70
80
90
Net debt, EUR million Gearing %
Net debt
Gearing
26
Liquidity was EUR 1.7bn at the end of Q4 2015
Repayments total EUR 0.24bn in 2016
| © UPM
Several growth projects completed – focus turns
to reaping the benefits in 2016 and beyond
11
Lappeenranta
biorefinery
120m litres of
renewable diesel
UPM Plywood
Otepää mill
expansion
to 90,000m3
Kymi
pulp mill
expansion
170,000t
UPM Raflatac
50% expansion in
APAC, growth in filmic
labelstock in Poland
UPM Paper Asia
Changshu
new speciality
paper machine
360,000t
Pietarsaari
pulp mill
expansion
70,000t
Fray Bentos
pulp mill
expansion
100,000t
Kaukas
pulp mill efficiency
improvement, paper and
pulp decoupling completed
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Capex so far EUR 660m Remaining capex EUR 110m
| © UPM
| © 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 2014 2015 2016e
EUR million
Operational investments
329
Capital expenditure
Strategic investments
Depreciation
Uruguay
acquisition
Myllykoski
acquisition
486
Estimate
375 350
| © UPM
Outlook for 2016
• UPM’s profitability improved in 2015 and the improvement is expected to continue in 2016. The business performance in 2016 is underpinned by the company’s growth projects and continuous cost efficiency measures.
• UPM’s growth projects are expected to contribute positively to the company’s earnings in 2016, compared with 2015. UPM continues its measures to reduce variable and fixed costs also in 2016. Currencies are expected to contribute positively as hedges roll over, assuming relevant currencies stay at about the same level as at the end of 2015.
| © UPM13
| © UPM
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
0,90
2008 2009 2010 2011 2012 2013 2014 2015
Dividend proposal
EUR per
share
0.400.45
0.55
14
Dividend policy
• UPM aims to pay an attractive
dividend, 30-40% of operating
cash flow per share
Board’s dividend proposal
for 2015
• EUR 0.75 (0.70) per share
• 34% of 2015 operating cash
flow per share
0.60 0.60 0.60
Dividend
0.700.75
| © UPM
Summary
UPM’s profitability improved in both Q4 and full year 2015
• Profit improvement programme exceeded its targets
• Several growth projects were completed
• Strong cash flow, record-strong balance sheet
UPM is well positioned for 2016
• Growth projects are expected to contribute
• Cost efficiency measures continue
• Impact of favourable currencies, as hedges roll over
Strong cash flow and balance sheet
• UPM is in a unique position to simultaneously distribute
attractive dividend, implement growth projects and
act on strategic opportunities
15
| © UPM
1. Continuous
cost efficiency
improvement
UPM strategy in action
16
UPM
Biorefining
UPM
Paper
Asia
UPM
RaflatacUPM
Energy
UPM
Paper
ENA
UPM
Plywood
2. EBITDA target
for growth projects
EUR 200m
3. Business portfolio
development and
value creation
BIOCHEMICALS
BIOCOMPOSITES
BIOFUELS
4. New businesses
Biofuels:
Lappeenranta
biorefinery
Pulp: 10%
capacity increase
Labelling materials:
Changshu expansion
Self-adhesive labels:
expansion in growth
markets and in higher
value added products
Plywood:
Otepää expansion
| © UPM
Strengths of UPM’s model
17
Top performance
Industry-leading
balance sheet
Attractive dividend
Strong cash flowFocused
investments
| © UPM
Q4 2015 – growth projects started to
deliver, record-strong balance sheet
EUR million Q4
2015
Q4
2014
Q3
2015 2015 2014
Sales 2,574 2,531 2,530 10,138 9,868
EBITDA 363 334 345 1,350 1,306
% of sales 14.1 13.2 13.6 13.3 13.2
Operating profit (* 225 230 507 1,163 847
Profit before tax (* 219 216 492 1,096 774
Earnings per share, EUR (* 0.37 0.32 0.76 1.75 1.17
ROE, % (* 9.9 9.2 20.7 12.1 8.3
Operating cash flow 390 462 363 1,185 1,241
Net debt 2,100 2,401 2,465 2,100 2,401
Gearing, % 26 32 31 26 32
19
(* excluding special items
| © UPM
Cash flow
EUR million Q4/15 Q4/14 Q3/15 2015 2014
EBITDA 363 334 345 1,350 1,306
Cash flow before change in working capital 364 349 352 1,365 1,291
Change in working capital 60 144 48 -8 73
Finance costs and income taxes -34 -31 -37 -172 -123
Net cash from operating activities 390 462 363 1,185 1,241
Capital expenditure -110 -103 -128 -432 -378
Asset sales and acquisitions 8 47 21 40 131
Cash flow after investing activities 288 406 256 793 994
20
| © UPM
Maturity profile and liquidity
21
0
100
200
300
400
500
600
700
800
900
1 000
2016
2017
2018
2019
2020
2021-2
026
2027
2028
2029
2030
EUR million
0
100
200
300
400
500
600
700
800
900
1 000
2016
2017
2018
2019
2020
2021-2
026
2027
2028
2029
2030
EUR million
Liquidity
Liquidity on 31 December 2015 was EUR 1.7bn
(cash and unused credit facilities)
Bilateral committed credit facilities EUR 1.025bn
Committed credit facilities
Maturity profile of outstanding debt Committed credit facilities’ maturities
| © UPM22
EBITDA 2015
EUR 1,350m
Capital employed, December 2015
EUR 11.0bn
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
Other operations
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM Plywood
UPM businesses by EBITDA generation and
capital employed
| © UPM
0
25
50
75
100
125
150
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
5
10
15
20
25
30
UPM Biorefining
23
Operating profit excluding special items
EUR million % of salesMarket review 2015
• Global chemical pulp demand
remained robust and growth was well
distributed over several regions.
• In Europe the average NBSK pulp
market price was 10% higher and the
average BHKP price was 26% higher
than in the previous year.
• Demand for advanced biofuel
increased, and regulations developed
in favour of advanced biofuels.
| © UPM
UPM Energy
24
0
10
20
30
40
50
60
70
80
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
10
20
30
40
50
60
70
80
Operating profit excluding special items Market review 2015
• The Nordic and Finnish hydrological
balance improved and was well above the
long-term average level in December.
• The average Finnish area spot price on
the Nordic electricity exchange was 18%
lower than the same period last year,
because of mild temperatures and
improved hydrology.
• The Finnish area price was above the
Nord Pool system price because of
dependency on imports.
• At year end the Finnish area front-year
forward electricity price closed 15% lower
than on the same date the previous year.
EUR million % of sales
| © UPM
UPM Raflatac
25
0
10
20
30
40
50
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
2
4
6
8
10
Operating profit excluding special items Market review 2015
• Global demand for self-adhesive label
material increased by approximately
4–5% compared with the previous year.
• Demand strengthened particularly in
Europe, thanks to higher consumer
spending.
• In North America, demand remained
robust, while in Asia, growth continued
at a lower level than in the previous
year. In Latin America, demand was at
the previous year’s level.
EUR million % of sales
| © UPM
UPM Paper Asia
26
0
10
20
30
40
50
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
3
6
9
12
15
Operating profit excluding special items Market review 2015
• In the Asia-Pacific region, fine paper
demand decreased slightly. Office
paper demand growth continued.
• Overcapacity prevailed in all paper
grades, and the preliminary United
States anti-dumping duties added
regional supply.
• The average market price in local
currencies was slightly lower in most
markets compared with 2014.
• Label and release paper demand
increased globally, and average prices
were slightly lower than in 2014.
EUR million % of sales
| © UPM
UPM Paper ENA
27
-40
-20
0
20
40
60
80
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
-4
-2
0
2
4
6
8
Operating profit excluding special items Market review 2015
Europe
• Demand for graphic paper was 4%
lower than in 2014. The decline was
steeper in newsprint and magazine
paper, while uncoated fine paper
demand decline was more moderate.
• Publication paper prices were on
average 5% lower than in 2014, while
fine paper prices were on average 4%
higher than in 2014.
North America
• Demand for magazine papers was 7%
lower than in 2014.
• The average US dollar price for
magazine papers were on average 1%
higher than in 2014.
EUR million % of sales
| © UPM
UPM Plywood
28
-5
0
5
10
15
20
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
-5
0
5
10
15
20
Operating profit excluding special items Market review 2015
• Plywood demand in Europe increased
slightly. Demand grew in both industrial
applications and construction-related
end-use segments.
• The plywood market in Europe was in
balance during the first half of 2015.
Imports increased over the course of
the year, leading to price pressure in
some product segments in the fourth
quarter.
EUR million % of sales
| © UPM
Chemical pulp market
30
Source: PPPC World-20 statistics
Pulp inventories
Days of
supply
300
400
500
600
700
800
900
1 000
1 100
2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/tonne
Q4 NBSK pulp price decreased 3% from Q3
Q4 BHKP pulp price unchanged from Q3
BHKP
NBSK
Source: FOEX Indexes Ltd.
15
20
25
30
35
40
45
50
55
60
65
2008 2009 2010 2011 2012 2013 2014 2015
Hardwood
inventories
Softwood
inventories
| © UPM
Price development in the Nordic and Helsinki power markets
31
Source: Reuters
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EUR/MWh
Coal SRMC Front Year System Front Year Helsinki Front Year
Finnish and Nordic electricity prices
| © UPM3232
400
500
600
700
800
900
1000
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
News SC LWC
WFC WFU
EUR/t
Europe
400
500
600
700
800
900
1000
1100
1200
1300
Jan-
08Ja
n-09
Jan-
10Ja
n-11
Jan-
12Ja
n-13
Jan-
14Ja
n-15
News SC LWC
WFC WFU
USD/t USD/t
ChinaNorth America
Sources: PPI, RISI
Graphic paper prices
400
500
600
700
800
900
1000
1100
1200
1300
WFC r (100% chemical pulp)
Reels (mixedchemical/mechanical pulp)
Uncoated Woodfree Reels (100%chemical pulp)
| © UPM
1 500
2 000
2 500
3 000
3 500
4 000
Q1
10
Q4
10
Q3
11
Q2
12
Q1
13
Q4
13
Q3
14
Q2
15
33
1 500
2 000
2 500
3 000
3 500
4 000
Q1 1
0Q
3 1
0Q
1 1
1Q
3 1
1Q
1 1
23Q
12
Q1 1
3Q
3 1
3Q
1 1
4Q
3 1
4Q
1 1
5Q
3 1
5
Sources: Cepiprint/fine, PPPC
Fine papers demand
in Europe -2% 2015
1%
Graphic papers demand in Europe decreased
by 2% in Q4 and 4% in 2015 from previous year
'000 tonnes
1 500
2 000
2 500
3 000
3 500
4 000
Q1 1
0
Q4 1
0
Q3 1
1
Q1 1
3
Q4 1
3
Q3 1
4
Q2 1
5
Newsprint demand
in Europe -6% 2015Magazine papers demand
in Europe -5% 2015
-4% -4%
| © UPM
-20
-15
-10
-5
0
5
10
15
20
-6,0
-3,0
0,0
3,0
6,0
Paper demand growth (% trailing 3 month)
Sources: Cepiprint, Cepifine, OECD
Euro zone composite leading indicator* (Y/Y %)
Graphic paperdemand growth
Growth in the European economy remains low
Euro zone composite leading indicator
34
| © UPM
Overcapacity in European graphic paper
is visible in margins
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
35
Cash cost of a marginal producer
Price
EUR/t
Sources: PPI, RISI, Pöyry