Massimo Reynaudo, President and CEO, comments on the results:
"Our Q3 results improved both year-on-year and quarter-on-quarter, with a significant contribution from the fully ramped-up UPM Paso de los Toros pulp mill. The earnings improvement, albeit good, was lower than earlier expected as the market demand of our products slowed down after the encouraging start of the year. We took measures in several of our businesses to safeguard profitability and we continue to take decisive actions to ensure the competitiveness of our businesses and support our growth ambitions.
Our Q3 sales were EUR 2,521 million and our comparable EBIT increased by 32% to EUR 291 million. Our net debt was EUR 2,804 million, 1.59 times EBITDA. Cash funds and unused committed credit facilities totalled at EUR 3.7 billion at the end of the quarter, following the successful issuance of our fourth Green Bond, for EUR 600 million, in August.
At our Capital Markets Day in September, we provided an update on the next phase of our strategy. Under the title "From transformation to growth" we presented a business portfolio which is based on sustainable and renewable feedstocks and fossil-free energy and is well positioned for robust growth in renewable fibres, advanced materials and in decarbonisation solutions, with graphic papers continuing to generate strong cash flows.
Renewable fibres
Pulp market demand slowed down during the summer and prices decreased consequently. This development was more pronounced for hardwood pulp in China.
UPM Fibres increased its comparable EBIT. The highly competitive business platform in Uruguay performed well. Q3 was the first quarter of full production at both pulp mills in Uruguay, paving the way for further optimisation to reach the targeted performance levels.
In Finland, the wood cost has reached unsustainable levels. To safeguard margins, we limited pulp production at two of our mills in September and early October and have since started negotiations for efficiency measures in UPM Pulp, UPM Forest and UPM Timber in Finland.
Advanced materials
Deliveries in UPM Raflatac and UPM Specialty Papers were lower than originally expected, as demand slowed down after the strong start of the year. UPM Specialty Papers was also impacted by peak fibre costs and weakness in the Chinese fine paper market. As a result, comparable EBIT in the two businesses decreased. UPM Plywood performed well considering the slow construction markets.
We see attractive growth prospects in advanced materials in the medium to long term. We are taking the necessary competitiveness measures to be in the best position to capture these opportunities.
Decarbonisation solutions
In the decarbonisation solutions, UPM Energy saw very low electricity prices during the summer, given the high volume of renewable power generation. UPM Biofuels’ feedstock costs started decreasing, and recent political decisions support a gradual market recovery in the future.
Work at the UPM Biochemicals site in Leuna, Germany, continued at full speed and we are very much looking forward to starting the refinery over the coming months.
Graphic papers
UPM Communication Papers improved both volumes and earnings compared to the previous quarter. To maintain good performance and cash generation in a mature and declining market, the UPM Hürth newsprint mill in Germany was permanently closed at the end of August. A fine paper machine at Nordland Papier, also in Germany, will be closed by the end of 2024.
During the quarter, EcoVadis awarded us a Platinum rating based on our sustainability performance in the categories of environment, labour and human rights, ethics, and sustainable sourcing. This is another compelling demonstration of our commitment to creating value for our customers using sustainable, renewable resources, reducing our environmental footprint, and increasing our positive societal impact. For UPM, sustainability is a core strategic value.
UPM’s strong and balanced business portfolio in renewable fibres, advanced materials and decarbonisation solutions provides us with a range of attractive growth opportunities in the coming years. In the current challenging business environment with a slow market recovery, however, our top priority is to further improve profitability and competitiveness. With these timely and targeted actions, we are setting ourselves up to capture the recovery and future growth in our product markets.”
Outlook for 2024
UPM’s comparable EBIT in Q4 2024 is expected to be on similar level or increase from Q4 2023 (EUR 323 million). UPM’s comparable EBIT in full-year 2024 is expected to be on similar level or increase from 2023.
