Upm-kymmene Oyj · OMXHEX:UPM
Upm-kymmene Oyj — Q1 2024 Earnings Presentation
39 slides from Upm-kymmene Oyj's earnings presentation, Apr 25, 2024
Slide 1: UPM Interim Report Q1 2024
UPM Interim Report Q1 2024 Massimo Reynaudo President and CEO 25 April 2024 1
Slide 2: Q1 2024: positive start to the year, growth projects contributed to earnings
Q1 2024: positive start to the year, growth projects contributed to earnings Comparable EBIT Q1 2024 in brief EURm 800 • Sales decreased by 5% to EUR 2,640m (2,787m in Q1 2023) 700 • Comparable EBIT decreased by 6% to 600 EUR 333m, 12.6% of sales (356m, 12.8%) 500 • Successful margin management and
Slide 3: Market demand recovering after unprecedented destocking in 2023
Market demand recovering after unprecedented destocking in 2023 Example: market shipments of self- Million m2 adhesive label materials in Europe • Gradual recovery in most product markets 2 200 Q1 continued in Q1 2024, having started in H2 2 000 2024: 2023 +29% 1 800 • Underlying consumer demand imp
Slide 4: UPM Paso de los Toros ramp-up progressing well
UPM Paso de los Toros ramp-up progressing well • The mill reached positive Q1 EBIT, production at 83% of capacity • In April, the railway from the mill to UPM’s port terminal in Montevideo was taken into use • A two-week maintenance shutdown will be taken in June 2024 after a full year of operations
Slide 5: Comparable EBIT in Q1 2024
Comparable EBIT in Q1 2024 EURm EURm 356 12.8% 333 323 333 12.6% 12.6% 12.8% 5 | © UPM
Slide 6: UPM Fibres
UPM Fibres • UPM Paso de los Toros reached positive EBIT, production at 83% of capacity • Political strike impacted production in Finland • Pulp deliveries +71% from last year 300 40 • Average pulp sales price -23% from EURm 250 35 % of sales last year, +13% from Q4 200 30 25 150 • Global pulp deman
Slide 7: UPM Energy
UPM Energy • Seasonally strong start to the year • Good hydropower optimisation • OL3 contributed well on the strong markets – started its maintenance shutdown in March 160 80 EURm % of sales • Average electricity sales price +12% 140 120 70 60 from last year, +24% from Q4 100 50 80 40 • Electricity
Slide 8: UPM Raflatac
UPM Raflatac • Deliveries continued to recover, especially in films and specials • Successful margin management 80 24 EURm % of sales • European market demand 70 60 21 18 continued to recover, up 29% from 50 15 40 12 last year, +16% from Q4 30 9 20 6 10 3 0 0 8 | © UPM
Slide 9: UPM Specialty Papers
UPM Specialty Papers • Deliveries continued to recover, especially in specialty grades • Successful margin management 80 24 EURm % of sales • Demand for specialty grades 70 60 21 18 continued to recover 50 15 40 12 • Demand for fine papers in Asia 30 9 20 6 was solid 10 3 0 0 9 | © UPM
Slide 10: UPM Communication Papers
UPM Communication Papers • Successful margin management • Lower fixed costs • Successful mitigation of political strikes 300 25 EURm % of sales • Average sales price -18% from last 240 20 year, +1% from Q4 180 15 120 10 • European market demand +5% 60 5 0 0 -60 -5 10 | © UPM
Slide 11: UPM Plywood
UPM Plywood • Solid performance in the low- volume environment • Temporary lay-offs to align capacity to demand 50 30 EURm % of sales 40 25 • Market activity remained low, 30 20 destocking has ended 20 15 10 10 5 0 0 11 | © UPM
Slide 12: Other operations
Other operations • Preparations in full speed for UPM Biochemicals production and business launch by the end of 2024 • Interest in bio-based MEG and renewable functional fillers strong in Europe • UPM Biofuels margins lower • Advanced renewable fuels market prices decreased – input costs remained
Slide 13: Strong financial position
Strong financial position Net debt Net debt Net debt/ EURm and leverage EBITDA (x) 4 500 3,0 • Net debt EUR 2,312m at the end of Q1 2024 3 750 2,5 • Net debt / EBITDA 1.46 3 000 2,0 Policy: ≤ 2x • Cash funds and committed credit facilities 2 250 1,5 EUR 3.5bn at the end of Q1 2024 1 500 1,0 • No fin
Slide 14: Outlook for 2024
Outlook for 2024 • UPM’s full-year 2024 comparable EBIT is expected to increase from 2023, supported by higher delivery volumes, continued 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 continue to improve gradual
Slide 15: Spearheads for growth
Spearheads for growth – strong business platforms for growth SPECIALTY PACKAGING FIBRES BIOREFINING MATERIALS Communication papers Plywood Energy 15 | © UPM
Slide 16: Global strengths and opportunities
Global strengths and opportunities Sales Personnel Assets EUR 10,460m 16,573 EUR 18,473m Finland Rest of Europe Uruguay Asia North America Rest of the world Figures for 2023 16 | © UPM
Slide 17: Creating the future: UPM Capital Markets Day September 2024
CREATING THE FUTURE UPM CAPITAL MARKETS DAY 5 SEPTEMBER 2024 VENUE: LSEG (London Stock Exchange Group) and through a webcast 17 | © UPM
Slide 18: Summary
Summary • Q1 adds to the confidence on a robust performance this year • Successful margin management and recovering market demand continued in most businesses • UPM Paso de los Toros and the OL3 delivered good contribution to earnings • Welcome to UPM Capital Markets Day on 5 September in London! 18
Slide 19: UPM Biofore – Beyond Fossils
UPMBIOFORE % BEYOND FOSSILS sf
Slide 20: Group financial performance and targets
Group financial performance and targets EURm Comparable EBIT % Comparable ROE Net debt Net debt Net debt/ EURm and leverage EBITDA (x) 2 200 14 4 500 3,0 2 000 Target: EBIT growth 12 3 750 2,5 1 800 Target: 10% 1 600 10 3 000 2,0 1 400 Policy: ≤ 2x 8 1 200 2 250 1,5 1 000 6 800 1 500 1,0 600 4 400 7
Slide 21: UPM by business area in 2023
UPM by business area in 2023 Sales Comparable EBIT Capital employed EUR 10,460m EUR 1,013m EUR 16,414m (average) Fibres Energy Raflatac Specialty Papers Communication Papers Plywood Other 21 | © UPM
Slide 22: Comparable EBIT by business area
Comparable EBIT by business area EURm UPM Fibres *) % of sales EURm UPM Communication Papers % of sales EURm UPM Specialty Papers % of sales 320 40 300 25 80 24 280 35 70 21 240 20 240 30 60 18 200 25 180 15 50 15 160 20 40 12 120 15 120 10 30 9 80 10 20 6 60 5 40 5 10 3 0 0 0 0 0 0 -40 -5 -60 -5 EU
Slide 23: Major investment cycle coming to an end
Major investment cycle coming to an end EURm Capital expenditure Estimate 1 600 1 400 Capex 2024 estimate 1 200 Transformative investments • Total EUR 550m 1 000 • Includes EUR 300m on the 800 UPM Leuna biochemicals 600 Depreciation project in Germany 400 Strategic investments • Operational investme
Slide 24: Transformative growth investments set to deliver
Transformative growth investments set to deliver UPM Paso de los Toros OL3 UPM Leuna First full year of production 2024 First full year of production 2024 Start-up by the end of 2024 Grows UPM Pulp by over 50% Grows UPM Energy by nearly 50% New growth business 24 | © UPM
Slide 25: Illustrative 5-year capital allocation (2023–2027)
Illustrative 5-year capital allocation*) (2023–2027) Performance focus Attractive dividend Strong operating cash flow EUR ~4–4.5bn Strong balance sheet Net debt/ EBITDA < 2x High return investments Maintain headroom EUR ~3.5–4.5bn *) This is not a forecast 25 | © UPM
Slide 26: We create a future beyond fossils
We create Growth a future • We respond to megatrends and meet customers’ beyond fossils changing needs • We create new markets and enable sustainable choices Innovation • We creating new business and competitive advantage Biofore strategy • We replace fossils drives stakeholder with biomaterials val
Slide 27: Our climate commitment
Our climate commitment WE ACT THROUGH WE ACT THROUGH WE ACT THROUGH FORESTS EMISSION REDUCTIONS PRODUCTS Committed to climate-positive -65% from own CO2 emissions Innovative products forestry and enhancing -30% from CO2 emissions Scientifically verifying the climate biodiversity of supply chain impa
Slide 28: Towards net-zero emissions
Towards net-zero emissions (UPM 2023) Research partners: LUKE, SYKE, IFEU 28 | © UPM
Slide 29: Bioeconomy offers a sustainable alternative to fossil-based economy
Bioeconomy offers a sustainable alternative to fossil-based economy Biomass use is not increasing Use of fossil resources Use of fossils has increased CO2 to carbon cycle increases CO2 amount global CO2 -emissions 60 GtCO2/year E-fuels and chemicals Biofuels and Other greenhouse gases biochemicals 4
Slide 30: UPM Forest Action programme
The UPM Forest Action programme takes a holistic view, covering the five fundamentals of responsible forestry: SOCIAL CLIMATE BIODIVERSITY WATER SOIL CONTRIBUTION 30 | © UPM
Slide 31: External recognitions
External recognitions 31 | © UPM
Slide 32: Maintenance shutdowns in 2023 and 2024
Maintenance shutdowns in 2023 and 2024 Significant maintenance shutdowns in 2023 and 2024 Timing Unit Maintenance shutdowns have an impact on Q2 23 Olkiluoto nuclear power plant OL1 and OL2 • Maintenance costs UPM Lappeenranta Biorefinery (turnaround) • Production volumes UPM Kymi pulp mill • Operat
Slide 33: Maturity profile and liquidity
Maturity profile and liquidity EURm Liquidity on 31 March 2024 was EUR 3.5bn (cash 2 000 funds and unused committed credit facilities) 1 500 UPM’s committed credit facilities: • EUR 159m rolling committed overdraft facility 1 000 maturing 2025 • EUR 400m bilateral revolving credit facilities (EUR 10
Slide 34: UPM's main currency exposures
UPM’s main currency exposures • Key currency exposures USD, GBP and JPY • Policy to hedge an average of 50% of the estimated net currency cash flow for the next 12 months Estimated annual foreign currency net cash flow, before hedging USD GBP JPY Others EURm 1,560 260 120 20 34 | © UPM
Slide 35: Chemical pulp market prices
UPM Fibres Chemical pulp market prices Pulp market prices, EUR Pulp market prices, USD EUR/tonne USD/tonne 1700 1700 1500 1500 1300 1300 1100 1100 900 900 700 700 500 500 300 300 BHKP, Europe NBSK, Europe BHKP, Europe, EUR NBSK, Europe, EUR BHKP, China NBSK, China BHKP, China, EUR NBSK, China, EUR S
Slide 36: Cost efficient generation enables robust profitability
UPM Energy Cost efficient generation enables robust profitability in changing market environment Market electricity prices vs UPM sales price EUR/MWh 240 220 200 180 160 140 120 100 80 60 40 20 0 2017 2018 2019 2020 2021 2022 2023 2024 Helsinki Front Year System Front Year UPM average sales price UP
Slide 37: Graphic paper prices
UPM Communication Papers Graphic paper prices Europe North America China EUR/t USD/t USD/t 1300 1700 1400 1200 1600 1300 1500 1100 1200 1400 1000 1300 1100 900 1200 1000 800 1100 900 700 1000 900 800 600 800 500 700 700 400 600 600 300 500 500 WFC r (100% chemical pulp) News SC LWC News SC LWC Uncoa
Slide 38: Paper price vs. cash cost of marginal cost producer
UPM Communication Papers Paper price vs. cash cost of marginal cost producer EUR/t Price Cash cost of a marginal producer 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Sources: PPI, RISI, AFRY 38 | © UPM
Slide 39: UPM Biofore – Beyond Fossils
UPMBIOFORE *4 BEYOND FOSSILS