UPM-Kymmene Corporation Stock Exchange Release 25 October 2016 at 9:30 EET
Interim report Q3/2016:
Performance improvement continued into second half of 2016 - excellent, seasonally strong Q3
Q3 2016 highlights
- Comparable EBIT increased by 31% to EUR 314 million (240 million).
- Growth projects contributed significantly to earnings, driving delivery growth in UPM Biorefining, UPM Raflatac and UPM Specialty Papers.
- UPM Paper ENA results were seasonally strong, with high operational efficiency and exceptionally low fixed costs.
- Cost-efficiency measures continued on a strong track.
- Record strong operating cash flow at EUR 506 million (363 million).
Q1 - Q3 2016 highlights
- Comparable EBIT increased by 28% to EUR 859 million (669 million).
- Operating cash flow increased to EUR 1,281 million (795 million).
- Net debt decreased to EUR 1,479 million (2,465 million) and gearing to 19% (31%).
- UPM sold the Schwedt newsprint mill in Germany in July.
- In July, UPM announced expansion of the UPM Kymi pulp mill capacity to 870,000 tonnes.
- In October, UPM announced a new self-adhesive label stock investment in Poland to meet the growing demand in Europe.
| Key figures | Q3/2016 | Q3/2015 | Q2/2016 | Q1-Q3/2016 | Q1-Q3/2015 | Q1-Q4/2015 |
| Sales, EURm | 2,445 | 2,530 | 2,445 | 7,336 | 7,564 | 10,138 |
| Comparable EBITDA, EURm | 423 | 345 | 385 | 1,210 | 987 | 1,350 |
| % of sales | 17.3 | 13.6 | 15.8 | 16.5 | 13.0 | 13.3 |
| Operating profit, EURm | 364 | 513 | 262 | 903 | 922 | 1,142 |
| Comparable EBIT, EURm | 314 | 240 | 264 | 859 | 669 | 916 |
| % of sales | 12.8 | 9.5 | 10.8 | 11.7 | 8.8 | 9.0 |
| Profit before tax, EURm | 336 | 498 | 250 | 848 | 861 | 1,075 |
| Comparable profit before tax, EURm | 288 | 225 | 252 | 807 | 608 | 849 |
| Profit for the period, EURm | 268 | 408 | 198 | 693 | 723 | 916 |
| Comparable profit for the period, EURm | 234 | 189 | 200 | 659 | 519 | 734 |
| Earnings per share (EPS), EUR | 0.50 | 0.77 | 0.37 | 1.30 | 1.36 | 1.72 |
| Comparable EPS, EUR | 0.44 | 0.35 | 0.37 | 1.23 | 0.97 | 1.38 |
| Return on equity (ROE), % | 13.8 | 21.0 | 10.1 | 11.7 | 12.5 | 11.9 |
| Comparable ROE, % | 12.1 | 9.7 | 10.2 | 11.1 | 9.0 | 9.5 |
| Return on capital employed (ROCE), % | 13.4 | 18.4 | 9.9 | 11.0 | 10.9 | 10.3 |
| Comparable ROCE, % | 11.5 | 8.6 | 10.0 | 10.5 | 7.9 | 8.3 |
| Operating cash flow, EURm | 506 | 363 | 434 | 1,281 | 795 | 1,185 |
| Operating cash flow per share, EUR | 0.95 | 0.68 | 0.81 | 2.40 | 1.49 | 2.22 |
| Equity per share at end of period, EUR | 14.75 | 14.89 | 14.36 | 14.75 | 14.89 | 14.89 |
| Capital employed at the end of period, EURm | 10,463 | 11,148 | 10,403 | 10,463 | 11,148 | 11,010 |
| Net interest-bearing liabilities at end of period, EURm | 1,479 | 2,465 | 1,876 | 1,479 | 2,465 | 2,100 |
| Gearing ratio at end of period, % | 19 | 31 | 24 | 19 | 31 | 26 |
| Personnel at the end of period | 19,559 | 19,874 | 20,711 | 19,559 | 19,874 | 19,578 |
Jussi Pesonen, President and CEO, comments on the Q3 result:
"UPM's performance in the third quarter was excellent and demonstrated the strength of our business model. Our growth projects and cost-efficiency measures continued to deliver. UPM Paper ENA was particularly successful in this seasonally strong quarter. Our comparable EBIT increased by 31% and our operating cash flow reached record-strong EUR 506 million. Furthermore, our net debt was EUR 986 million lower than a year ago.
UPM Paper ENA's performance shows that value can also be created in a challenging business environment. Successful commercial strategy, continued strict cost management and optimal use of assets deliver results. This was particularly visible in the seasonally strong third quarter, as operational efficiency was on a high level and fixed costs very low.
Going forward, we expect the structural decline in demand of graphic papers in Europe to continue as in the recent years. Therefore we are in the process of conducting a review of our European graphic paper assets. Any potential restructuring plans would be announced in the near future.
Our growth investments continued to gather pace, and contributed significantly to the earnings growth. On top of the pulp and self-adhesive label investments, the Lappeenranta biorefinery and the specialty paper machine in UPM Changshu made good contributions to our performance. We have now reached 80% of the EUR 200 million EBITDA target we have set for this first wave of growth investments.
Our second wave of focused growth investments is proceeding well. The Otepää plywood mill and UPM Kaukas pulp mill expansions are ramping up in the fourth quarter. The second expansion of UPM Kymi pulp mill is proceeding according to plans. In October, we announced a EUR 35 million investment in UPM Raflatac factory in Poland to meet the increasing label stock demand in Europe. In Uruguay we are continuing negotiations on prospects for long-term development.
All in all, we have every reason to be pleased with the quarter. Our strong cash flow enables both focused growth investments and attractive distribution to shareholders. A strong balance sheet gives us the opportunity to accelerate business transformation, when the opportunity and timing are right. UPM aims to maintain a strong balance sheet in all situations."
Outlook for 2016
UPM's outlook for 2016 is unchanged. Profitability is expected to improve in both the full year 2016 and H2 2016, compared with last year. Q4 2016 performance is expected to be negatively impacted compared to Q3 2016 by seasonal factors and clearly higher maintenance activity in UPM Biorefining and UPM Paper ENA.
UPM's growth projects are expected to contribute positively to the company's earnings in 2016, compared with 2015. UPM is continuing its measures to reduce variable and fixed costs in 2016. Currencies are expected to contribute positively as hedges have rolled over.
Webcast and press conference
UPM's President and CEO Jussi Pesonen will present the results in a webcast and a conference call for analysts and investors, held in English language, today at 13:15 EET.
Later in the afternoon, Jussi Pesonen will present the results in a press conference held in Finnish language at the UPM Group Head Office (The Biofore House) in Helsinki, Alvar Aallon katu 1, at 14:30 EET.
Webcast and conference call details:
The conference call can be participated in either by dialling a number in the list below or following the webcast online at www.upm.com or through this link .
Only participants who wish to ask questions in the conference call need to dial in. All participants can view the webcast presentation online. We recommend that participants start dialling in 5-10 minutes prior to ensure a timely start of the webcast.
The presentation is available at www.upm.com for 12 months after the call.
Conference call title: UPM Interim Report for January - September 2016
Direct telephone numbers:
FI: +358981710495 UK: +442031940552 SE: +46856642702 US: +18557161597
International telephone numbers with a pin code 75349746#
BE: 080049792 (Toll-Free) FR: +33172040035 NO: +47 23500244 DK: +45 35445597 AU: +61 (0) 284058555 AT: +43 (0) 19287909 CH: +41 (0) 445831883 CN: +86 4006815487 DE: +49 (0) 6922224998 ES: +34 914146225 HK: +852 30600228 IN: 0018038524627 IR: +353 (0) 12475065 IT: +39 (0) 236010935 JP: +81 (0) 344559575 NL: +31 (0) 207133412 SP: +65 64298388
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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 page 18 of the 2015 Annual Report. Risks and opportunities are discussed on pages 17-18 and risks and risk management are presented on pages 84-86 of the report.
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UPM-Kymmene Corporation Pirkko Harrela Executive Vice President, Stakeholder Relations
UPM, Media Relations 9.00-16.00 EET tel. +358 40 588 3284 media@upm.com
UPM Through the renewing of the bio and forest industries, UPM is building a sustainable future across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Paper ENA and UPM Plywood. Our products are made of renewable raw materials and are recyclable. We serve our customers worldwide. The group employs around 19,600 people and its annual sales are approximately EUR 10 billion. UPM shares are listed on NASDAQ OMX Helsinki. UPM - The Biofore Company - www.upm.com
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