UPM-Kymmene Corporation Stock Exchange Release (Half-Year Financial Report) 23 July 2024 at 09:30 EEST
UPM Half-Year Financial Report 2024:
Comparable EBIT increased by 60% in Q2, UPM Paso de los Toros reached full capacity
Q2 2024 highlights
- Sales totalled EUR 2,546 million (2,558 million in Q2 2023)
- Comparable EBIT increased by 60% to EUR 182 million, 7.2% of sales (114 million, 4.5%)
- Operating cash flow was EUR 204 million (459 million)
- Moderate recovery in many product markets
- UPM Paso de los Toros pulp mill reached nominal capacity before its first maintenance shutdown in June
- Unusually high maintenance activity with three pulp mills and all nuclear power plant units having scheduled maintenance
H1 2024 highlights
- Sales decreased by 3% to EUR 5,186 million (5,345 million in H1 2023)
- Comparable EBIT increased by 10% to EUR 515 million (470 million), and was 9.9% (8.8%) of sales
- Operating cash flow was EUR 539 million (1,173 million)
- Net debt increased to EUR 2,763 million (2,557 million) and the net debt to EBITDA ratio was 1.64 (1.07)
- Cash funds and unused committed credit facilities totalled EUR 3.3 billion at the end of Q2 2024
- Sale of the Steyrermühl site, Austria in January
- CDP recognised UPM with double ‘A’ score for transparency on climate change and forest
Key figures
| Q2/2024 | Q2/2023 | Q1/2024 | Q1–Q2/2024 | Q1– Q2/2023 | Q1– Q4/2023 | |
| Sales, EURm | 2,546 | 2,558 | 2,640 | 5,186 | 5,345 | 10,460 |
| Comparable EBITDA, EURm | 359 | 255 | 489 | 848 | 732 | 1,573 |
| % of sales | 14.1 | 10.0 | 18.5 | 16.3 | 13.7 | 15.0 |
| Operating profit, EURm | 50 | 108 | 354 | 404 | 426 | 608 |
| Comparable EBIT, EURm | 182 | 114 | 333 | 515 | 470 | 1,013 |
| % of sales | 7.2 | 4.5 | 12.6 | 9.9 | 8.8 | 9.7 |
| Profit before tax, EURm | 28 | 96 | 332 | 360 | 336 | 464 |
| Comparable profit before tax, EURm | 163 | 101 | 311 | 474 | 445 | 934 |
| Profit for the period, EURm | 33 | 77 | 279 | 312 | 261 | 394 |
| Comparable profit for the period, EURm | 131 | 77 | 258 | 389 | 358 | 755 |
| Earnings per share (EPS), EUR | 0.05 | 0.15 | 0.51 | 0.56 | 0.48 | 0.73 |
| Comparable EPS, EUR | 0.23 | 0.15 | 0.47 | 0.70 | 0.66 | 1.40 |
| Return on equity (ROE), % | 1.1 | 2.5 | 9.6 | 5.5 | 4.2 | 3.2 |
| Comparable ROE, % | 4.6 | 2.5 | 8.9 | 6.9 | 5.8 | 6.2 |
| Return on capital employed (ROCE), % | 1.6 | 3.0 | 9.6 | 5.7 | 4.5 | 3.5 |
| Comparable ROCE, % | 5.2 | 3.1 | 9.1 | 7.2 | 5.8 | 6.4 |
| Operating cash flow, EURm | 204 | 459 | 335 | 539 | 1,173 | 2,269 |
| Operating cash flow per share, EUR | 0.38 | 0.86 | 0.63 | 1.01 | 2.20 | 4.25 |
| Equity per share at the end of period, EUR | 20.10 | 21.24 | 21.42 | 20.10 | 21.24 | 20.93 |
| Capital employed at the end of period, EURm | 14,590 | 15,322 | 15,028 | 14,590 | 15,322 | 14,916 |
| Net debt at the end of period, EURm | 2,763 | 2,557 | 2,312 | 2,763 | 2,557 | 2,432 |
| Net debt to EBITDA (last 12 months) | 1.64 | 1.07 | 1.46 | 1.64 | 1.07 | 1.55 |
| Personnel at the end of period | 16,776 | 17,571 | 16,132 | 16,776 | 17,571 | 16,573 |
UPM presents certain measures of performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of alternative performance measures are presented in » UPM Annual Report 2023
Massimo Reynaudo, President and CEO, comments on the results:
“In Q2, our comparable EBIT increased by 60% on last year, in line with our expectations. The continued improvement was sustained by a moderate recovery in our product markets as well as a greater contribution from the UPM Paso de los Toros pulp mill in Uruguay. Our Q2 performance was held back by an exceptional amount of maintenance at our pulp mills and nuclear power plant units. The shutdowns were successful, and our assets are now in an excellent position to serve our customers in the second half of the year, operating at full capacity.
Our Q2 sales were EUR 2,546 million and our comparable EBIT was EUR 182 million. Our operating cash flow was EUR 204 million and our net debt increased slightly to EUR 2,763 million. During the quarter we paid out the first instalment of dividends for the previous financial year, totalling EUR 400 million.
In UPM Fibres, pulp demand was good, and prices continued to increase. A very important milestone was reached in the UPM Paso de los Toros pulp mill in Uruguay, where production reached nominal capacity for a full month already before the first maintenance shutdown in June. The quarter was impacted by maintenance at both pulp mills in Uruguay and at UPM Pietarsaari, Finland.
UPM Specialty Papers delivered good results despite higher pulp prices. In UPM Raflatac, global demand for self-adhesive label materials recovered from last year’s lows. Both businesses implemented successful margin management actions.
UPM Communication Papers’ profitability decreased due to delivery volumes that were impacted by lower demand after the restocking in Q1, and the political strikes in Finland. Margins in Q2 were burdened as fibre cost increases materialised more quickly than price increases. In May, we announced plans to close the Hürth newsprint mill in Germany and to shut down one fine paper machine (PM3) at Nordland Papier, also in Germany. Tight margin management and productivity improvements will be the key focus in the second half of the year.
UPM Energy had a weak quarter of seasonally lower electricity prices and prolonged maintenance activities at Olkiluoto nuclear power plant units.
UPM Plywood continued its steady performance in a seasonally good quarter with all plywood mills running at full capacity. EU anti-dumping measures on the imports of birch plywood from Russia entered into force and had a positive impact on the European market.
In Other operations, the European market for advanced renewable fuels continued to be soft and the performance of our biofuels business remained at the level of the previous quarter.
We have made further progress with the design for the potential biofuels refinery in Rotterdam and completed a major part of the basic engineering. The plan includes new proprietary technology related to processing the desired UPM integrated feedstocks, which we have validated at a demonstration scale. Before the potential investment decision, our focus will be on testing the new technologies on flexible feedstock options at a larger scale and securing the feedstock supply. This will be essential to ensure differentiation and support the long-term competitiveness of the business case. We expect this work to take approximately two years.
We remain confident that the future growth in demand for advanced renewable fuels is attractive. The recent market turmoil only confirms our view that a differentiated, competitive and sustainable feedstock range will be the key to ensuring profitability over market cycles and potential regulatory developments.
Our entry to the highly attractive biochemicals market is approaching. The UPM Biochemicals refinery in Leuna, Germany, is moving steadily towards the start of production by the end of the year. Commissioning continued in Q2 and the commercial interest for wood-based products remained strong. In June, we announced an exciting partnership with Nokian Tyres, a leading manufacturer of premium tyres, which will start using UPM BioMotion™ renewable functional fillers in its production.
During the quarter, we struck five new business-specific collective labour agreements in Finland in good co-operation with employee representatives. These mutually beneficial agreements support our long-term competitiveness and ability to serve our customers.
For the second half of the year, we anticipate strong run and improving results. Our biggest investment ever, the UPM Paso de los Toros pulp mill, has moved from ramp-up to regular production. With our competitive Uruguay platform operating at scale, we expect the increased pulp deliveries to improve our second-half results. With our portfolio of competitive businesses in expanding markets, UPM is set to perform well while we prepare for the next phase of growth.”
Outlook for 2024
UPM’s full-year 2024 comparable EBIT is expected to increase from 2023, supported by higher delivery volumes, the ramp-up and optimisation of the UPM Paso de los Toros pulp mill, and lower fixed costs. Demand for many UPM products is expected to gradually improve as the destocking seen in 2023 is over. The market conditions for renewable fuels are expected to be weaker than last year. UPM continues to manage margins and take actions to reduce variable and fixed costs.
In H2 2024, comparable EBIT is expected to be higher than in H1 2024. This improvement is expected to come especially from UPM Fibres, with the full pulp capacity available and pulp price levels starting at a higher level than at the start of the year. There are no major maintenance shutdowns scheduled for the company in H2 2024, whereas H1 2024 was impacted by unusually high maintenance activity and political strikes in Finland. The timing of the annual energy-related refunds is expected to support the result in Q4.
Invitation to UPM’s webcast on half year financial report 2024
A webcast and a conference call for analysts and investors will start at 13:15 EEST. The half year report will be presented in English by President and CEO Massimo Reynaudo and CFO Tapio Korpeinen. Participants can follow the webcast online via this link.
Participants wishing to ask questions after the presentation must register for the conference call. To participate in the conference call, please register here. After registering. you will be provided with telephone numbers, a user ID and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to join the queue.
The webcast will be available at www.upm.com for 12 months after the call.
*
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 178–179 of the Annual Report 2023. Risks and opportunities are discussed on pages 34–35, and risks and risk management are presented on pages 133–137.
*
UPM, Media Relations
Mon-Fri 9:00–16:00 EEST
tel. +358 40 588 3284
media@upm.com
UPM
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 16,600 people worldwide and our annual sales are approximately EUR 10.5 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com
Follow UPM on X | LinkedIn | Facebook | YouTube | Instagram | #UPM #biofore #beyondfossils
