Upm-kymmene Oyj · OMXHEX:UPM
Upm-kymmene Oyj — Q2 2024 Earnings Presentation
37 slides from Upm-kymmene Oyj's earnings presentation, Jul 23, 2024
Slide 1: UPM Half Year Financial Report 2024
UPM Half Year Financial Report 2024 Massimo Reynaudo President and CEO 23 July 2024 1
Slide 2: Q2 2024: Comparable EBIT +60%, Paso de los Toros reached full capacity
Q2 2024: Comparable EBIT +60% from last year, UPM Paso de los Toros reached full capacity Comparable EBIT Q2 2024 in brief EURm 800 • Sales totalled EUR 2,546m (2,558m in Q2 2023) 700 • Comparable EBIT increased by 60% to 600 EUR 182m, 7.2% of sales (114m, 4.5%) 500 • Moderate recovery in many produ
Slide 3: Moderate market recovery
Moderate market recovery Example: market shipments of self- Million m2 adhesive label materials in Europe 2,200 • Gradual recovery in most product markets during H1 2024 Q2 2,000 2024: • Demand development moderated in Q2 +23% 2024 after the strong Q1 1,800 Trend • Underlying consumer demand moderat
Slide 4: UPM Paso de los Toros reached full run
UPM Paso de los Toros reached full run • The mill reached nominal capacity for a full month before the first maintenance shutdown • The first two-week maintenance shutdown was taken in June as scheduled • In April, the railway from the mill to UPM’s port terminal in Montevideo was taken into use • N
Slide 5: Heavy maintenance and political strikes in Finland held back H1 2024
Heavy maintenance and political strikes in Finland held back performance in H1 2024 • High maintenance activity in H1 2024, total impact of EUR 140m (* – Q2 2024: EUR 130m (*, Q1 2024: EUR 10m (* – Successful maintenance shutdowns at three pulp mills, including the first shutdown at UPM Paso de los
Slide 6: Comparable EBIT in Q2 2024
EURm 114 4.5% Pr i e a ri s a le os ts ol me s i e os ts rre n ie s th e r 182 7.2% Comparable EBIT in Q2 2024 EURm 333 12.6% Pr i e a ri s a le os ts ol me s i e os ts rre n ie s th e r 182 7.2% 6 | © UPM
Slide 7: UPM Fibres
UPM Fibres • UPM Paso de los Toros reached nominal capacity • Scheduled maintenance shutdowns at the Paso de los Toros, Fray Bentos and Pietarsaari pulp mills, impact EUR 100m 300 40 • Pulp deliveries +16% from last year EURm 250 35 % of sales 30 • Average pulp sales price +8% from 200 25 150 20 las
Slide 8: UPM Energy
UPM Energy • Scheduled maintenance shutdown at the Olkiluoto 1, 2 and 3 nuclear power plant units, impact EUR 30m • Good hydropower volumes 160 80 EURm % of sales • 140 70 Average electricity sales price +12% 120 60 from last year, -29% from Q1 100 50 80 40 • Electricity prices and consumption 60 40
Slide 9: UPM Raflatac
UPM Raflatac • Deliveries recovered from last year’s lows • Successful margin management 80 24 EURm % of sales • European market demand 70 60 21 18 recovered, up 23% from last year, 50 15 40 12 -4% from Q1 30 9 20 6 10 3 0 0 9 | © UPM
Slide 10: UPM Specialty Papers
UPM Specialty Papers • Deliveries recovered from last year, especially in specialty grades • Focus on margin management and cost saving actions in variable and fixed costs 80 24 EURm % of sales 70 21 • Demand for specialty grades was 60 18 good 50 15 40 12 • Demand for fine papers in Asia 30 20 9 6
Slide 11: UPM Communication Papers
UPM Communication Papers • Deliveries impacted by lower demand after the restocking in Q1 and the political strikes in Finland • Plans to close Hürth newsprint mill and one fine paper machine (PM3) at Nordland Papier in Germany 300 25 EURm % of sales • Average sales price -12% from last 240 20 year,
Slide 12: UPM Plywood
UPM Plywood • Full run operations in seasonally good market 50 30 EURm % of sales • Market activity improved but was still 40 25 at low level 30 20 15 • EU anti-dumping measures on the 20 10 birch plywood imports from Russia 10 5 entered into force 0 0 12 | © UPM
Slide 13: Other operations
Other operations • Preparations in full speed for UPM Biochemicals production and siness la n h y the en of • Advanced renewable fuels market remained soft, impacted by fuel imports an pstream emission reductions from outside Europe • UPM Biofuels performance remained at the level of previous qua
Slide 14: Strong financial position
Strong financial position Net debt Net debt Net debt/ EURm and leverage EBITDA (x) 4,500 3.0 • Net debt EUR 2,763m at the end of Q2 2024 3,750 2.5 • Net debt / EBITDA 1.64 3,000 2.0 Poli y: ≤ • Cash funds and committed credit facilities 2,250 1.5 EUR 3.3bn at the end of Q2 2024 1,500 1.0 • No financ
Slide 15: Outlook for 2024
Outlook for 2024 • UPM’s f ll-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
Slide 16: New collective labour agreements create a good basis in Finland
The new collective labour agreements create a good basis for the development of our businesses in Finland • In Q2, 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-t
Slide 17: UPM Communication Papers adjusting capacity with customer demand
UPM Communication Papers adjusting capacity with customer demand and ensure competitiveness • Plans to close Hürth newsprint mill and one fine paper machine (PM3) at Nordland Papier in Germany latest by the end of 2024 • Annual reductions of 330,000 tonnes of newsprint paper capacity and 280,000 ton
Slide 18: UPM Raflatac accelerates growth in Graphics by acquiring Grafityp
UPM Raflatac accelerates growth in Graphics by acquiring Grafityp • UPM Raflatac has acquired Grafityp, a Belgian-based company to further accelerate its growth in graphics solutions • Strengthens UPM Raflata ’s competitive positioning in this attractive product segment, expands its portfolio and gi
Slide 19: Biofuels growth plan makes progress
Biofuels growth plan makes progress, additional actions to secure key competitive advantages • Future demand growth for advanced renewable fuels is attractive • Major part of the basic engineering completed for the potential biofuels refinery in Rotterdam • New proprietary technology related to proc
Slide 20: UPM Biochemicals preparing for the start of production
UPM Biochemicals preparing for the start of production • Commissioning of UPM Leuna biochemical refinery proceeds at full speed towards start-up by the end of 2024 • Business function teams and the operations team are in place and the core processes required to run the business are established • Wor
Slide 21: 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 21 | © UPM
Slide 22: Summary
Summary • Q2 comparable EBIT increased by 60% from last year • UPM Paso de los Toros reached full run • Unusually heavy maintenance activity during Q2 • Comparable EBIT is expected to increase in H2 2024 • UPM Raflatac accelerates growth in Graphics with an acquisition • UPM Biofuels growth plan upd
Slide 23: UPM Biofore: Beyond Fossils
UPMBIOFORE % BEYOND FOSSILS 9s
Slide 24: 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 Poli y: ≤ 8 1,200 2,250 1.5 1,000 6 800 1,500 1.0 600 4 400 750
Slide 25: Business area long-term return targets
Business area long-term return targets UPM UPM UPM UPM Communication UPM Energy Fibres Specialty Papers Papers Plywood UPM Raflatac 30 30 30 30 30 30 28 ROCE % *) 28 ROCE % **) 28 ROCE% 28 FCF/CE % 28 ROCE % 28 ROCE % 26 26 26 26 26 26 24 24 24 24 24 24 22 22 22 22 22 22 20 20 20 20 20 20 18 18 18 1
Slide 26: Spearheads for growth
Spearheads for growth – strong business platforms for growth SPECIALTY PACKAGING FIBRES BIOREFINING MATERIALS Communication papers Plywood Energy 26 | © UPM
Slide 27: 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 27 | © UPM
Slide 28: 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 28 | © UPM
Slide 29: 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 30: 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 31: Maturity profile and liquidity
Maturity profile and liquidity EURm Liquidity on 30 June 2024 was EUR 3.3bn (cash 2,000 funds and unused committed credit facilities) 1,500 UPM’s ommitte re it fa ilities: • EUR 159m rolling committed overdraft facility 1,000 maturing 2025 • EUR 400m bilateral revolving credit facilities (EUR 100m m
Slide 32: 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 1,480 250 110 80 32 | © UPM
Slide 33: 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 34: Cost efficient generation enables robust profitability
UPM Energy Cost efficient generation enables robust profitability in changing market environment EUR/MWh Market electricity prices vs UPM sales price 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 35: 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% ch emical pu lp) News SC LWC News SC LWC Unc
Slide 36: 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 36 | © UPM
Slide 37: UPM Biofore: Beyond Fossils
UPMBIOFORE “4 BEYOND FOSSILS s€