Massimo Reynaudo, President and CEO, comments on the results:
“Our performance in 2024 improved from the previous year, supported by a good contribution from the new pulp mill in Uruguay and modestly improved volumes in the advanced materials businesses. However, the recovery in our product markets slowed down in the second half of the year. We implemented decisive measures to improve performance and were able to reduce fixed costs by EUR 103 million during the year. We will drive further fixed cost saving and margin improvement actions into 2025.
In Q4, our sales grew by 4% to EUR 2,632 million. The comparable EBIT was EUR 418 million, an increase of 29% when compared to Q4 2023. Excluding the fair value increase of our Finnish forest assets, totalling EUR 105 million, our business performance was on a similar level as in Q4 2023 or Q3 2024. Operating cash flow was strong at EUR 570 million, and our financial position is solid, with net debt to EBITDA ratio of 1.66 at the end of the year.
In Q4, UPM Fibres continued to increase pulp deliveries, but pulp sales prices were at a low level. The railway from UPM Paso de los Toros to the port of Montevideo was in full use by the end of the year and, thus, the new platform is now in complete operation. In UPM Raflatac, UPM Specialty Papers and UPM Plywood, the slow improvement in delivery volumes continued. In UPM Communication Papers, markets for graphic papers normalized and deliveries decreased. In UPM Energy, electricity prices increased from the previous quarters. The markets for advanced biofuels continued to be challenging.
We enter 2025 with a broad portfolio of attractive businesses and valuable assets. To enhance the value of the company in the current uncertain operating environment, we are acting on three fronts: accelerating growth in targeted areas, improving overall performance and considering opportunities in our business portfolio.
In renewable fibres, 2025 will be the first year of full production at the Paso de los Toros pulp mill in Uruguay. This will add approximately 300 000 tonnes of pulp production compared with 2024 and unlock further potential in our highly competitive Uruguayan platform. We expect a reduction in production costs in Uruguay in 2025 and plan for debottlenecking opportunities at the mills to increase production further in the medium term.
In Finland, the wood market continued to be structurally tight, keeping wood costs high and availability limited. In H2 2024, we established a new operating model that optimises the profitability of our Finnish Fibres platform. As a result, we have been able to operate our well-maintained pulp mills profitably despite the unsustainably high wood costs and low pulp price.
In advanced materials, UPM Raflatac has a strong number two position in the global labelling markets. With the acquisition of Metamark, combined with the recent acquisitions of Grafityp and AMC, we are expanding the graphics solutions business further, gaining a significant position in the attractive market. UPM Specialty Papers aims to capture growth in faster growing geographies and flexible packaging. In both businesses, we are taking action to sharpen competitiveness through fixed cost reduction, streamlining product portfolio and production optimisation. With these measures, we aim for the businesses to accelerate growth and get back to double-digit EBIT margins.
In decarbonisation solutions, UPM Biofuels had a clear negative impact on our 2024 result throughout the year due to the significant downturn in the renewable fuels market. The performance is now expected to improve with decreasing variable costs and somewhat improved market conditions.
In UPM Biochemicals, commercial interest for our products and side streams has been confirmed with customer agreements. We are managing a sales and customer qualification pipeline that is multiple times the annual capacity. This allows us to optimize the product mix.
At the Leuna Biorefinery, we initiated the commissioning and start-up in late 2024 and have made good progress in most units. However, during the quality assurance checks we identified certain corrective works required in the sugars-to-chemicals process. These works have been arranged and will take a few months. Meanwhile, the sequential start-up in the other units continues. The integrated commercial production of the site is expected to start in H2 2025.
Our positive view on the attractive business case in biochemicals remains unchanged.
The Leuna Biorefinery is a first-of-its-kind project, which has been implemented during a series of external crises, such as the COVID 19 pandemic and the war in Ukraine with subsequent resource and supply chain challenges. As we are approaching the completion of the project, we have made an impairment of EUR 373 million on the biorefinery assets resulting from the cost overruns and construction delays during the project. The book value of the refinery now reflects the estimated cost to construct a similar plant.
Finally, shaping the business portfolio is an ongoing strategic process. This analysis is especially important during times of uncertainty and major shifts in the global operating environment. In UPM Fibres, we have built a very strong platform in Uruguay, which we can leverage for growth. In UPM Raflatac, we decided to establish a strong position in the attractive graphics business through acquisitions. In biofuels we decided to take two years to thoroughly validate and test the business case prior to the next larger growth steps. During the same time we look forward to a successful launch of the biochemicals business and taking the learnings for next steps. We have also exited the biocomposites business and plan to exit biomedicals to focus our development work.
We are confident in UPM's ability to create value from our portfolio of businesses and our recent large investments. On this basis, the Board of Directors has today proposed a dividend of EUR 1.50 per share for 2024, representing a dividend yield of 5.6% at the end of 2024. The Board has also decided to initiate UPM's first share buy-back program. The maximum number of shares to be repurchased is 6,000,000, representing approximately 1.1% of the total number of shares, and the maximum amount to be used for the program is EUR 160 million.”
Profit guidance
UPM’s comparable EBIT in H1 2025 is expected to be approximately in the range of EUR 400-625 million (EUR 515 million in H1 2024).
Outlook for 2025
UPM’s performance in H1 2025 is expected to benefit from higher delivery volumes and lower fixed costs, but be held back by lower sales margins, compared with H1 2024. The year 2025 starts with similar pulp prices and lower electricity price than 2024 started.
2025 will be the first year of full production at the UPM Paso de los Toros mill, which is expected to grow pulp deliveries. Deliveries are expected to continue to increase for labelling materials, specialty papers and plywood. Communication paper deliveries are expected to decrease.
UPM Biofuels is expected to improve its performance in H1 2025, compared with H1 2024.
There are significant uncertainties in geopolitics and the global business environment, which may impact the development of UPM’s product deliveries, sales prices and various input cost factors.
Sensitivity to pulp and electricity prices
UPM’s comparable EBIT is sensitive to pulp and electricity prices. The figures below represent Group earnings sensitivities on annual level.
UPM is a large producer and consumer of chemical pulp. A EUR 50/tonne change in average pulp price would impact annual comparable EBIT by approximately EUR 170 million (net impact: assuming no correlation between pulp and paper prices) to approximately EUR 270 million (gross impact: assuming paper pricing would match changes in pulp costs).
UPM is a large producer and consumer of electricity in Finland and separately hedges part of its electricity sales and purchases. Based on UPM’s estimated unhedged net electricity sales position in Finland in 2025, a EUR 10/MWh change in average electricity market price in Finland would impact annual comparable EBIT by approximately EUR 30 million.
