UPM Financial Review Jussi Pesonen President and CEO 2 February 2011

Transcription

1 UPM Financial Review 2 Jussi Pesonen President and CEO 2 February 211

2 2 in brief Solid top-line recovery in all businesses 2 UPM - 2 sales grew by 16%, driven by volumes - sales grew by 12%, driven by sales prices and volumes Global commodity price inflation reappeared - variable costs increased, especially for fibre EBITDA clearly improved to EUR 1,343 (1,62) million - negatively impacted by higher than average maintenance and other costs Strong operating cash flow EUR 982 (1,259) million - net debt decreased by EUR 444 million - dividend proposal for 2 is EUR.55 (.45) per share UPM advanced the European paper business consolidation with the acquisition of Myllykoski

3 Operating profit recovered to the pre-recession level million 3 Operating profit excluding special items % % % Q7 Q % Q9 3 UPM

4 FINANCIALS Strong cash flow was the best quarter in 2 million Operating cash flow Q7 Q8 Q9 4 UPM

5 Balance sheet strengthened, improving room for strategic manoeuvring Net debt, million 5 5 Net debt / EBITDA (trailing 12 months) 4,5 Net debt, million Gearing % Net debt / EBITDA 3.5 4, 3, Gearing , , Net debt 2, 3 Net debt , UPM

6 Dividend proposal for 2 Cash flow million per share ,9,8,7,6,5 Dividend policy at least 1/3 of net cash flow from operating activities less operational capital expenditure net cash flow calculated as an average over three years Operational capex Cash flow from operating activities less operational capex Minimum dividend by the dividend policy Actual / proposed dividend,4,3,2 Minimum dividend for 2 according to dividend policy EUR.5 per share Board's dividend proposal for 2 EUR.55 (.45) per share 6 UPM

7 2 was a year of improving demand 1 Delivery volumes, indexed Q7 = UPMU Label Publication papers Fine and speciality papers Sawn timber Plywood

8 EBITDA development in 2 vs. 2: Paper weaker, all other businesses improved million Pulp , % Energy Paper Forest and timber Label Plywood Other operations 1, % EBITDA 2 EBITDA 2 8 UPM

9 Loss-making year for Paper due to higher fibre costs and lower paper prices million Paper BA operating profit excluding special items % of sales 2 12, % 2 3.6% 2 6.% 2-4.1% 7, ,5-4 Q7 Q8 Q9-2, UPMU 4-year average operating profit margin 2.3%

10 Fibre prices squeezing paper makers' margins WFU / LWC /ton 95 Hardwood pulp (BHKP) /ton Newsprint /ton RCP (ONP) /ton BHKP 7 55 Newsprint 15 WFU 75 6 LWC RCP WFU LWC PIX BHKP Source: FOEX Indexes Ltd., PPI, RISI UPM News 45 g/m² RCP

11 UPM's paper prices in 211 UPM has increased paper prices in the beginning of 211. Examples in Europe: - Magazine papers about + 5-8% - Newsprint about + 2% - Fine and speciality papers no material changes The average price for UPM's paper deliveries is expected to increase by about 6% in the beginning of the year from 2 Publication paper prices return broadly to 2 level Raw material costs have increased substantially from 2 higher paper prices recover part of the realised fibre cost inflation 11 UPM

12 UPM agreed to acquire Myllykoski Corporation and Rhein Papier Mills Plattling Papier (RP) Grade SC Cap. 1, t 38 Personnel /2 Myllykoski Paper LWC, SC MD Albbruck MWC/LWC Lang Paper News, SC MD Plattling LWC Madison Paper SC Hûrth (RP) News 3 2 TOTAL 2,83 2,6 *) North America Madison Myllykoski Paper Source: Myllykoski * ) incl. non-mill personnel Enterprise value EUR 9 million -.8 % in PVO, valued at EUR 7 million Financing - UPM issues 5 million shares and agreed EUR 8 million financing The agreement subject to customary closing conditions - Closing expected by the end of UPM Rhein Papier Albbruck Lang Plattling UPM mills Myllykoski mills

13 Benefits of the Myllykoski acquisition Forming a cost efficient European paper supplier committed to print media Contributing to the cost competitiveness of the print media Strengthening customer service and supply security closer to our customers Enabling efficiency improvement necessary for the future development of the European industry Ensuring sourcing of key inputs like fiber and energy cost efficiently in the future 13 UPM

14 Achieve sustainable cost structure through consolidation Price Transaction Margin squeeze Declining real price trend needed for print media competitiveness Costs Sustainable profitability Restructuring costs and investments to gain synergies Continuous potential for cost savings in a large production portfolio 14 UPM

15 Capital expenditure and investment options million Capital expenditure and estimate for 211 Estimate 72 3 ( * 257 Priority investment options Investments in European cost efficiency Biofuels projects in Finland or in France Changshu paper mill expansion permit received from authorities Expansion in chemical pulp 15 UPM e Depreciation excl. amortization of goodwill Strategic investments Operational investments Uruguay and PVO acquisitions * ) excluding acquisitions

16 Outlook for 211 ( * Guidance for operating profit excluding special items to improve from 2 - H1 211 to improve clearly from H1 2 Variable cost inflation expected to moderate from 2 Business area drivers for 211 vs vs. 2 Energy Pulp Sawn timber Paper Label Plywood UPM average Prices Deliveries 16 UPM ( * See complete wording of the "Outlook" in the Financial Review 2

17 Summary 2 was a year of recovering demand profitability recovered to pre-recession level Global commodity price inflation reappeared Sales prices in UPM's products started to increase in begins with higher prices, especially in Paper Stable or improving demand, increasing product prices and moderating cost inflation provide a base for continued profitability improvement in 211 Dividend proposal for 2 EUR.55 (.45) per share With the acquisition of Myllykoski, UPM is strengthening its position as a cost efficient reliable partner for paper customers 17 UPM

18 18 UPM

19 BUSINESS DRIVERS

20 BUSINESS DRIVERS Demand rebound after recession has slowed down Euro zone composite leading indicator 5, 3,4 1,9,3-1,2 Paper demand growth (%, trailing 3 month) Euro zone composite leading indicator ,8-4,3 Graphic paper demand growth , ,4-2 -9, Sources: Cepiprint, Cepifine, OECD 2 UPM

21 BUSINESS DRIVERS Graphic papers demand Graphic papers demand in Europe +4% YTD ' tonnes ' tonnes Magazine and WFC papers demand in North America +7% YTD % 3-2% Source: Cepiprint/fine, PPPC 21 UPM

22 BUSINESS DRIVERS Paper prices have started to follow fibre price development / ton Graphic paper prices in Europe 8 WFU WFC 7 LWC 6 SC 5 News July 211 Source: PPI 22 UPMU

23 BUSINESS DRIVERS Graphic paper prices /t Europe USD/t 13 North America USD/t 13 China imported domestic '3 '4 '5 '6 ' ' ' ' ' '3 '4 '5 '6 ' ' ' ' ' '3 '4 '5 '6 ' ' ' IQ 2 News 45 g/m² LWC off 6 g/m² WFUr 8 g/m² SC rg 56 g/m² WFCr g/m² News 48,8 g/m² LWC 59,2 g/m² WFUr off 74 g/m² SC 51,8 g/m² WFCr 88,8 g/m² WFU s 8-12 g WFC s g Source: PPI, RISI 23 UPM

24 BUSINESS DRIVERS Chemical pulp market price USD/ton USD 949/t USD 849/t PIX NBSK (Northern Bleached Softwood Kraft) PIX BHKP (Northern Bleached Hardwood Kraft) Source: FOEX Indexes Ltd. 24 UPM

25 BUSINESS DRIVERS Wood prices at a high level Fibre wood prices in Finland, / m³ Pine Birch Source: Metla 25 UPM

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27 Key financials Sales, m 2,357 2,8 8,924 7,719 Sales growth (%) 12% -9% 16% -18% EBITDA, m ,343 1,62 % of sales Operating profit, excl. special items, m EPS excl. special items, Net cash from operating activities, m , UPM

28 EBITDA negatively impacted by higher than average maintenance and other costs million EBITDA % % % % Q7 Q8 Q9 28 UPM

29 EBITDA development in 2 vs. 2: Improvement from higher volumes million ,62 13,8% Delivery volumes and inclusion of Uruguay Prices, currency Energy costs Fixed Wood costs costs 1,343 Purchased pulp, RCP, other items 15.% 5 EBITDA 2 EBITDA 2 29 UPM

30 Cash flow, million / / 2 2 EBITDA ,343 1,62 Cash flow before change in working capital , Change in working capital Finance costs and income taxes Net cash from operating activities ,259 Capital expenditure Asset sales and acquisitions Cash flow after investing activities ,45 3 UPM

31 Balance sheet Gearing ratio improved by pp % EUR million 12 5 Net debt decreased by 444m 8 Target: maximum 9% , , Liquidity was 2.1bn repayments 1.1bn in UPM

32 Maturity profile and liquidity Liquidity Liquidity on 31 December 2 was 2.1bn cash 269 million and unused credit facilities EUR 1,825 million Committed credit facilities syndicated credit facility EUR 1bn bilateral committed credit facilities EUR 825 million million 1 Maturity profile of outstanding debt million 1 Committed credit facilities UPM

33 Energy 2 vs. 2 Average sales price for electricity increased by 9% Electricity sales volume was higher The average price of procured electricity was higher due to increased condensing production volumes, million 8 6 Operating profit excluding special items 44.4% % 48 Sales, M EBITDA, M Operating profit M excl. special items Average price, change % Electricity sales, TWh 9% % UPM

34 Pulp 2 vs. 2 Uruguay operations were included in the Pulp business area as of December 2 Operating profit improved due to higher average pulp sales price and volumes External sales represented about 23% of total sales, million Operating profit excluding special items % 132 Sales, M 2 1, % 35 EBITDA, M Operating profit M excl. special items Pulp deliveries, 1, t 577 2, , UPM Associated company Metsä-Botnia

35 Forest and Timber 2 vs. 2 Operating profit improved due to higher delivery volumes and prices of timber products Increase in the fair value of biological assets net of wood harvested was 147 million The increase includes a change in estimated timing of wood harvested, million Operating profit excluding special items % 19.7% 35 Sales, M 2 1, ,337 2 EBITDA, M Operating profit M excl. special items Fair value change of biological assets Fair value change of biological assets Sawn timber deliveries, 1, m 3 1,729 1, UPM

36 Paper 2 vs. 2 Cost of fibre increased significantly Average paper price decreased by 1% Delivery volumes increased by %, million Operating profit excluding special items % 82 Sales, M 2 6, , EBITDA, M % -68 Operating profit M excl. special items Average price, change % Paper deliveries, 1, t % 9, % 9,21 36 UPM

37 Label 2 vs. 2 Operating profit improved mainly due to higher sales volumes Average sales prices increased, compensating for the higher raw material costs, million Operating profit excluding special items % % 16 Sales, M EBITDA, M 1, Operating profit M excl. special items UPM

38 Plywood 2 vs. 2 Operating loss decreased mainly due to higher delivery volumes Sales prices were slightly higher than last year, million Operating profit excluding special items Sales, M EBITDA, M % -5.5% -3-5 Operating profit M excl. special items Plywood deliveries, 1, m³ UPM

39 39 UPM