upm results q1 2015good profitability continued in q1 2015 • profit improvement actions and...
TRANSCRIPT
Jussi Pesonen
President and CEO
28 April 2015
UPM RESULTS Q1 2015
| © UPM
Q1 2015 – good profitability continued
Operating profit excl. special items increased to EUR 204m (196m)
+ Underpinned by profit improvement actions and favourable
currencies, mitigated by hedging
− Publication paper prices and paper deliveries in Europe, as well
as electricity sales prices had a negative impact
Good performance in UPM Biorefining, UPM Plywood, UPM
Raflatac and UPM Paper Asia
UPM is well positioned for earnings growth – outlook is unchanged
UPM invests in the top performing plywood business
by expanding the Otepää mill in Estonia
| © UPM
Net debt
EUR 2,419m -358m
Sales
EUR 2,486m 0%
EBITDA
EUR 325m +2m
Q1 2015 – good profitability continued
Operating cash flow
EUR 108m -156m
(* excluding special items3
Operating profit (*
EUR 204m +8m
Profit before tax (*
EUR 182m +6m
Operating cash flow / share, 12 month
EUR 2.03 +0.34
Net debt / EBITDA
1.8x -0.5x
Q1 2015 vs. Q1 2014:
EPS (*
EUR 0.29 +0.02
ROE (*
8.1% +0.4pp
| © UPM
0
50
100
150
200
250
300
350
400
450
EBITDA
Q1/14
EBITDA
Q1/15
EBITDA in Q1 2015 vs. Q1 2014
Raflatac
Paper
AsiaOther
operations
and
eliminations
Energy
Biorefining
Paper
ENA
Plywood
0
50
100
150
200
250
300
350
400
450
EBITDA
Q1/14
EBITDA
Q1/15
EURm
Prices
Variable
costs
Fixed
costs
Deliveries
Profit improvement actions and currencies
offset the decrease in publication paper
and electricity prices, paper deliveries EURm
Significant improvement in UPM Biorefining
and UPM Plywood, UPM Paper ENA and
UPM Energy clearly lower
4
32313.0%
32513.1%
32313.0%
32513.1%
Currency,
net
impact
| © UPM
Profit improvement programme targeting EUR 150
million of fixed and variable cost savings
0
50
100
150
200
Q314 Q414 Q115 Q215 Q315 Q415 Q116
5
Other fixed and
variable cost
savings
Full annualised EUR 150 million impact of the programme is
expected to realise by the end of 2015, as compared with Q3/14
Fixed cost savings
from planned
closures (*
(* 800,000 tonnes of publication paper capacity in Europe: three paper
machines were closed in Q1/15, employee consultation process is
proceeding regarding one machine
EUR million
31%
realised in
Q1 2015
| © UPM
Operating profit *) by business area
6
0
2,5
5
7,5
10
12,5
0
10
20
30
40
50
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
0
4
8
12
16
20
24
0
20
40
60
80
100
120
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
0
10
20
30
40
50
0
20
40
60
80
100
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
0
2
4
6
8
10
0
10
20
30
40
50
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
-4
-2
0
2
4
6
-50
-25
0
25
50
75
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
0
4
8
12
16
20
0
5
10
15
20
25
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
EURm % of salesUPM Paper Asia EURm % of salesUPM Paper ENA EURm % of salesUPM Plywood
EURm % of salesUPM RaflatacEURm % of salesUPM EnergyEURm % of salesUPM Biorefining
*) excluding special items
| © UPM
Solid cash flow
7
0
200
400
600
800
1 000
1 200
1 400
Q10
8
Q30
8
Q10
9
Q30
9
Q11
0
Q31
0
Q11
1
Q31
1
Q11
2
Q31
2
Q11
3
Q31
3
Q11
4
Q31
4
Q11
5
Operating cash flow
Cash flow
after investing
activities
EUR million Cash flow, trailing 12 months
• Q1 2015 operating cash
flow was EUR 108m
(264m)
• In Q1 2015, working capital
increased by EUR 147m
(decreased by EUR 1m),
mainly due to seasonal
factors
• In the latest 12 months,
operating cash flow was
EUR 1,085m (896m), i.e.
EUR 2.03 per share
| © UPM
Strong balance sheet
8
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
2015
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
Net debt, EUR millionNet debt / EBITDA(trailing 12 months)
Net debt
Net debt / EBITDA
1.8
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
2015
20
30
40
50
60
70
80
90
Net debt, EUR million Gearing %
Net debt
Gearing
31
Liquidity was EUR 0.9bn at the end of Q1 2015
Repayments total EUR 0.3bn in 2015
| © UPM
Outlook for 2015
• The improved profitability achieved in 2014 is expected to continue in 2015, and there are prospects for further improvement.
• Profitability is underpinned by the EUR 150 million profit improvement programme, as well as the first positive impacts from the company’s growth projects.
• Profitability is affected by lower publication paper prices and lower electricity sales prices in the beginning of the year. The current weakened euro and lower oil price are supportive for the company’s earnings.
| © UPM9
| © UPM
UPM invests in the top performing plywood
business by expanding the Otepää mill
10
• UPM will almost double the
production at the Otepää plywood
mill in Estonia to 90,000 m3
• Investment includes a new bio
power plant at the mill
• The total investment of EUR 40
million will be completed by the
end of 2016
• Enables serving the growing
demand in key customer
industries
| © UPM
Lappeenranta biorefinery started
commercial production
• World’s first biorefinery producing
120 million litres of wood based
advanced renewable diesel
• Commercial production started in
January 2015, ramp up still in
early stage
• Production technology works as
planned and the high-quality
product fulfils customer
specifications
• Distribution starts through
Finnish service stations St1 and
ABC in May 201511
| © UPM
10% increase in pulp production capacity
• Pietarsaari pulp mill
modernisation and 70,000 tonnes
capacity expansion completed in
June 2014
• Fray Bentos pulp mill production
permit allows a 100,000 tonnes
increase in production. Minor
investments were carried out in
Q4 2014
• Kymi pulp mill 170,000 tonnes
capacity expansion proceeding
well, start-up by the end of 2015
12
| © UPM
Advancing in growth markets
• Investment in labelling materials
and woodfree speciality papers
at the UPM Changshu mill in
China proceeding well. Capacity
360,000 tonnes, start-up by the
end of 2015
• 50% increase in self-adhesive
labelstock coating capacity in
APAC, start-up in Q2 2015
• Expansion of filmic labelstock
production in Nowa Wies,
Poland, start-up in Q2 2015
13
| © UPM
Low investment needs in existing assets allow
growth projects with modest total capex
14
0
200
400
600
800
1 000
1 200
2008 2009 2010 2011 2012 2013 2014 2015e 2016e
EUR million
Operational investments
329
Capital expenditure
Strategic investments
Depreciation
Uruguay
acquisition
Myllykoski
acquisition
500
Estimate
375
| © UPM
Summary
Good profitability continued in Q1 2015
• Profit improvement actions and currencies offset the market
headwinds in UPM Paper ENA and UPM Energy
UPM is well positioned for earnings growth
• Profit improvement programme has more than EUR 100m of
further annualised impact to materialise by the end of 2015
• More than half of the growth capex has been spent, nearly all of
the EUR 200m EBITDA impact is yet to come
• Current exchange rates promise further tailwind
Strong cash flow and balance sheet
• UPM is in a unique position to simultaneously distribute
attractive dividend, implement growth projects and
act on strategic opportunities
15
| © UPM
1. Profit
improvement
programme
EUR 150m
UPM strategy in action
16
UPM
Biorefining
UPM
Paper
Asia
UPM
Raflatac
UPM
Energy
UPM
Paper
ENA
UPM
Plywood
2. EBITDA target
for growth projects
EUR 200m
3. Business portfolio
development and
value creation
BIOCHEMICALS
BIOCOMPOSITES
BIOFUELS
4. New businesses
Biofuels:
Lappeenranta
biorefinery
Pulp: 10%
capacity increase
Labelling materials:
Changshu expansion
Self-adhesive labels:
expansion in growth
markets and in higher
value added products
Plywood:
Otepää expansion
| © UPM
Strengths of UPM’s model
17
Top performanceIndustry-leading
balance sheet
Attractive dividend
Strong cash flowFocused
investments
| © UPM
Q1 2015 – good profitability continued
EUR million Q1
2015
Q1
2014
Q4
2014
2014
Sales 2,486 2,481 2,531 9,868
EBITDA 325 323 334 1,306
% of sales 13.1 13.0 13.2 13.2
Operating profit (* 204 196 230 847
Profit before tax (* 182 176 216 774
Earnings per share, EUR (* 0.29 0.27 0.32 1.17
ROE, % (* 8.1 7.7 9.2 8.3
Operating cash flow 108 264 462 1,241
Net debt 2,419 2,777 2,401 2,401
Gearing, % 31 37 32 32
19
(* excluding special items
| © UPM
Cash flow
EUR million Q1
2015
Q1
2014
Q4
2014
2014
EBITDA 325 323 334 1,306
Cash flow before change in working capital 292 297 349 1,291
Change in working capital -147 1 144 73
Finance costs and income taxes -37 -34 -31 -123
Net cash from operating activities 108 264 462 1,241
Capital expenditure -82 -68 -103 -378
Asset sales and acquisitions 2 69 47 131
Cash flow after investing activities 28 265 406 994
20
| © UPM
Maturity profile and liquidity
21
0
100
200
300
400
500
600
700
800
900
1 000
2015
2016
2017
2018
2019
2020
2021-2
026
2027
2028
2029
2030
EUR million
0
100
200
300
400
500
600
700
800
900
1 000
2015
2016
2017
2018
2019
2020
2021-2
026
2027
2028
2029
2030
EUR million
Liquidity
Liquidity on 31 March 2015 was EUR 0.9bn
(cash and unused credit facilities)
Committed credit facilities EUR 0.475bn
Maturity profile of outstanding debt Committed credit facilities’ maturities
| © UPM
Currency exposure
22
USD GBP JPY Others
EURm 810 500 160 170
• 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
| © UPM
UPM Biorefining Q1 2015 vs. Q1 2014
23
0
20
40
60
80
100
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
0
4
8
12
16
20
Q1 2015 533Q1 2014 496
SalesEUR million
Q1 2015 97Q1 2014 56
Operating profit excluding special items
EUR million
Operating profitEUR million*)
*) excluding special items
EURmillion
% of salesBusiness performance
• Operating profit increased mainly due
to higher euro-denominated average
pulp sales prices. In the comparison
period profitability was negatively
impacted by scheduled maintenance
shutdown at the UPM Kaukas pulp
mill.
• Pulp deliveries decreased by 1% to
810,000 tonnes (816,000).
7% 41
| © UPM
UPM Energy Q1 2015 vs. Q1 2014
24
0
20
40
60
80
100
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
0
10
20
30
40
50
Q1 2015 99Q1 2014 124
SalesEUR million
Q1 2015 38Q1 2014 56
Operating profit excluding special items
Operating profitEUR million*)
*) excluding special items
EURmillion
Business performance
• Operating profit decreased due to
lower average electricy sales price
and lower nuclear and hydropower
generation volumes, partly relating to
an unplanned outage in Olkiluoto 2
nuclear plant.
• The average electricity sales price
decreased by 13% to EUR 40.0/MWh
(45.8/MWh).
EUR million % of sales
-18-20%
| © UPM
UPM Raflatac Q1 2015 vs. Q1 2014
25
0
10
20
30
40
50
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
0
2
4
6
8
10
Q1 2015 342Q1 2014 300
SalesEUR million
Q1 2015 21Q1 2014 20
Operating profitEUR million*)
Operating profit excluding special items
EURmillion
Business performance
• Operating profit increased due to
higher delivery volumes.
*) excluding special items
EUR million % of sales
114%
| © UPM
UPM Paper Asia Q1 2015 vs. Q1 2014
26
0
10
20
30
40
50
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
Q2 15
0
3
6
9
12
15
Q1 2015 298Q1 2014 277
SalesEUR million
Q1 2015 22Q1 2014 25
Operating profitEUR million*)
*) excluding special items
Operating profit excluding special items
EURmillion
Business performance
• Operating profit decreased as the net
impact of changes in currencies
including hedging was slightly negative.
• Deliveries increased by 1% to 349,000
tonnes (347,000).
EUR million % of sales
8% -3
| © UPM
UPM Paper ENA Q1 2015 vs. Q1 2014
27
-40
-20
0
20
40
60
80
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
-4
-2
0
2
4
6
8
Q1 2015 1,256Q1 2014 1,334
SalesEUR million
-37Q1 2015 5Q1 2014 42
Operating profit excluding special items
Operating profitEUR million*)
*) excluding special items
EURmillion
-6%
Business performance
• Operating profit decreased mainly due to
higher euro-denominated pulp costs and
lower delivery volumes.
• The average price for all paper deliveries in
euro was at the previous year’s level.
Favourable currency impacts on export
prices and an improved product mix offset
the negative impacts of lower publication
paper prices in Europe.
• Paper deliveries decreased by 6% to
2,023,000 tonnes (2,148,000).
EUR million % of sales
| © UPM
UPM Plywood Q1 2015 vs. Q1 2014
28
-5
0
5
10
15
20
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
-5
0
5
10
15
20
Q1 2015 119Q1 2014 114
SalesEUR million
8Q1 2015 19Q1 2014 11
Operating profit excluding special items
Operating profitEUR million*) EUR
million
Business performance
• Operating profit increased due to lower
variable costs and higher delivery
volumes.
• Deliveries increased by 6% to 199,000
cubic metres (188,000).
*) excluding special items
EUR million % of sales
4%
| © UPM
Chemical pulp market
30
Source: PPPC World-20 statistics
Pulp inventories
Days of
supply
300
400
500
600
700
800
900
1 000
1 100
2008 2009 2010 2011 2012 2013 2014 2015
USD/tonne
Q1 NBSK pulp price decreased 3% from Q4
Q1 BHKP pulp price increased 2% from Q4
BHKP
NBSK
Source: FOEX Indexes Ltd.
15
20
25
30
35
40
45
50
55
60
65
2008 2009 2010 2011 2012 2013 2014 2015
Hardwood
inventories
Softwood
inventories
| © UPM
Price development in the Nordic and Helsinki power markets
31
Source: Reuters
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EUR/MWh
Coal SRMC Front Year System Front Year Helsinki Front Year
Finnish and Nordic electricity prices
| © UPM3232
400
500
600
700
800
900
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
News SC LWC
WFC WFU
EUR/t
Europe
500
600
700
800
900
1000
1100
1200
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15News SC LWC
WFC WFU
USD/t USD/t
ChinaNorth America
Sources: PPI, RISI
Graphic paper prices
500
600
700
800
900
1000
1100
1200
WFC r (100% chemical pulp)
Reels (mixedchemical/mechanical pulp)
Uncoated Woodfree Reels (100%chemical pulp)
| © UPM
1 000
1 500
2 000
2 500
3 000
3 500
Q1
10Q
3 10
Q1
11Q
3 11
Q1
12Q
3 12
Q1
13Q
3 13
Q1
14Q
3 14
Q1
15
33
1 000
1 500
2 000
2 500
3 000
3 500
Q1 1
0Q
3 1
0Q
1 1
1Q
3 1
1Q
1 1
23Q
12
Q1 1
3Q
3 1
3Q
1 1
4Q
3 1
4Q
1 1
5
Sources: Cepiprint/fine, PPPC
Fine papers demand
in Europe
-4%
Graphic papers demand in Europe decreased
by 5% in Q1 2015
'000 tonnes
1 000
1 500
2 000
2 500
3 000
3 500
Q1 1
0Q
3 1
0Q
1 1
1Q
3 1
1Q
1 1
2Q
3 1
2Q
1 1
3Q
3 1
3Q
1 1
4Q
3 1
4Q
1 1
5
Newsprint demand
in EuropeMagazine papers demand
in Europe
-3%-8%
| © UPM
-20
-15
-10
-5
0
5
10
15
20
-6,0
-3,0
0,0
3,0
6,0
Paper demand growth (% trailing 3 month)
Sources: Cepiprint, Cepifine, OECD
Euro zone composite leading indicator* (Y/Y %)
Graphic paperdemand growth
Growth in the European economy remains low
Euro zone composite leading indicator
34