UPM-Kymmene - Interim report (Q1 and Q3)

Growth businesses continue to perform well, weak quarter for Paper in Europe

UPM-Kymmene Corporation     Interim report               6 August 2013 at 09:30
EET 

Growth businesses continue to perform well, weak quarter for Paper in Europe

Q2/2013 (compared with Q2/2012)

• Earnings per share excluding special items was EUR 0.20 (0.16), and reported
EUR 0.22 (0.39) 

• Operating profit excluding special items was EUR 138 million, 5.5% of sales
(128 million, 4.9%) 

• EBITDA was EUR 258 million, 10.2% of sales (325 million, 12.3% of sales)

• Fixed costs were EUR 36 million lower than last year.



Q1-Q2/2013 (compared with Q1-Q2/2012)

• Earnings per share excluding special items was EUR 0.38 (0.38), and reported
EUR 0.31 (0.62) 

• Operating profit excluding special items was EUR 282 million, 5.6% of sales
(284 million, 5.4%) 

• EBITDA was EUR 542 million, 10.9% of sales (682 million, 13.0% of sales)

• Operating cash flow was EUR 187 million (360 million), impacted by a
temporary increase in working capital. 





Key figures                         Q2/201  Q2/201  Q1-Q2/20  Q1-Q2/20  Q1-Q4/20
                                    3       2       13        12        12      
--------------------------------------------------------------------------------
Sales, EURm                          2,520   2,632     4,994     5,240    10,492
--------------------------------------------------------------------------------
EBITDA, EURm 1)                        258     325       542       682     1,312
--------------------------------------------------------------------------------
% of sales                            10.2    12.3      10.9      13.0      12.5
--------------------------------------------------------------------------------
Operating profit (loss), EURm          146     108       227       268    -1,318
--------------------------------------------------------------------------------
excluding special items, EURm          138     128       282       284       556
--------------------------------------------------------------------------------
% of sales                             5.5     4.9       5.6       5.4       5.3
--------------------------------------------------------------------------------
Profit (loss) before tax, EURm         128     221       194       367    -1,271
--------------------------------------------------------------------------------
excluding special items, EURm          120     101       249       243       471
--------------------------------------------------------------------------------
Net profit (loss) for the period,      114     208       161       328    -1,122
 EURm                                                                           
--------------------------------------------------------------------------------
Earnings per share, EUR               0.22    0.39      0.31      0.62     -2.14
--------------------------------------------------------------------------------
excluding special items, EUR          0.20    0.16      0.38      0.38      0.74
--------------------------------------------------------------------------------
Operating cash flow per share, EUR    0.16    0.27      0.35      0.69      1.98
--------------------------------------------------------------------------------
Equity per share at end of period,   13.93   17.99     13.93     17.99     14.18
 EUR                                                                            
--------------------------------------------------------------------------------
Gearing ratio at end of period, %       48      38        48        38        43
--------------------------------------------------------------------------------
Net interest-bearing liabilities     3,524   3,593     3,524     3,593     3,210
 at end of period, EURm                                                         
--------------------------------------------------------------------------------

1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets, excluding the
share of results of associated companies and joint ventures, and special items. 

CEO Jussi Pesonen comments on the second quarter of 2013:

“The second quarter was in line with our expectations: growth businesses
continued to perform well, whereas Paper was impacted by lower delivery volumes
and prices in Europe. Our operating profit excluding special items was EUR 138
million (128 million). Operating cash flow was lower than Q2 last year due to a
temporary increase in working capital. 

Our Pulp business experienced a strong quarter, with good delivery volumes and
increased prices. In Label, our growth actions resulted in increased volumes,
more than offsetting the increased fixed costs caused by expanded operations.
In Energy, profitability continued to be strong, despite being impacted by
lower hydropower volumes. Plywood and Timber continued on a positive track
despite the challenges of European markets. 

Paper experienced what we believe will prove to be the weakest quarter in 2013.
Profitability continued on a good level in our Chinese and speciality paper
operations, but sales margins in our European graphic paper business as well as
export business were significantly lower than last year. In Q2, our Paper
business also suffered a significant negative impact from unrealised energy
hedges, especially when compared with Q1 2013. 

The implementation of the fixed cost savings measures and capacity closures
announced in January 2013 are on schedule. The announced capacity closures were
concluded in Rauma, Finland and Ettringen, Germany, by the end of April. At
this point, employee negotiations have been concluded in all countries except
for France, where they started in July. By the end of Q2, 40% of the annualised
cost savings had materialised. Along with other cost savings, this offsets the
earnings impact from lower paper deliveries, but could not compensate for the
lower sales margins. 

It is clear that we need to take action to improve our performance and make
sure that the company continues to transform. In Label we introduced
business-specific efficiency improvement measures in July,” Pesonen concludes. 

Outlook for 2013

Economic growth in Europe is expected to remain very low in the latter part of
2013. This will continue to have a negative impact on the European graphic
paper markets in particular. Growth market economies are expected to fare
better, which is supportive for the global pulp and label materials markets as
well as paper markets in Asia and wood products markets outside Europe. The
current hydrological situation in the Nordic countries is slightly weaker than
the long-term average. The forward electricity prices in Finland for the rest
of 2013 are slightly lower than the realised market prices in H1 2013. 

In H2 2013 compared with H1 2013, the Paper business area is expected to
benefit from lower costs, driven partly by the on-going cost reduction
measures, and seasonally stronger demand. Pulp business area will be impacted
by annual maintenance stops in three of the four pulp mills. 

Capital expenditure for 2013 is forecast to be approximately EUR 400 million.

Conference call and press conference

UPM's President and CEO Jussi Pesonen will present the results in a conference
call and a webcast for analysts and investors, held in English language, on 6
August 2013 at 13:15 EET. 

Later in the afternoon, UPM's President and CEO Jussi Pesonen will present the
results in a press conference held in Finnish language at UPM Group Head Office
in Helsinki (main entrance, Eteläesplanadi 2) on 6 August 2013 at 14:30 EET. 

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. 

The presentation is available at www.upm.com for 12 months after the call.

We recommend that participants start dialling in 5-10 minutes prior to ensure a
timely start of the conference. 

Conference call title: UPM Q2 Interim Report January - June 2013

PIN: 306858#

DIRECT TELEPHONE NUMBERS:

Participant - Belgium: +32 2 404 0642

Participant - Denmark: +45 3544 5579

Participant - Finland: +358 9 8171 0462

Participant - France: +33 1 7072 2026

Participant - Norway: +47 2350 0204

Participant - Sweden: +46 8 5055 6477

Participant - UK: +44 20 3364 5372

Participant - US: 855 716 1589


INTERNATIONAL TELEPHONE NUMBERS WITH PIN:

Participant - Australia: +61 2 8073 0498

Participant - Austria: +43 1 928 6161

Participant - Switzerland: +41 44 580 65 22

Participant - Germany: +49 69 2017 44 210

Participant - Spain: +34 914 142 009

Participant - Hong Kong: +852 580 83239

Participant - India: +91 22-3301 9422

Participant - Ireland: +353 1 447 5418

Participant - Italy: +39 02 3600 6663

Participant - Japan: +81 3 5050 5409

Participant - Netherlands: +31 20 716 80 20

Participant - Singapore: +65 3158 2497

**

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. For more detailed information about risk
factors, see pages 74-75 of the company's annual report 2012. 

**

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications

UPM Media Desk
Mon-Fri 9.00-16.00 EET
Phone: +358 40 5883284
E-mail: communications@upm.com
www.twitter.com/UPM_News

UPM leads the integration of bio and forest industries into a new, sustainable
and innovation-driven future. Our products are made of renewable raw materials
and are recyclable. UPM consists of three Business Groups: Energy and pulp,
Paper, and Engineered materials. The Group employs around 22,000 people. We are
present in 67 countries and have production units in 17 countries. UPM's annual
sales exceed EUR 10 billion. UPM's shares are listed on the Helsinki stock
exchange. UPM - The Biofore Company - www.upm.com

Attachments:

UPM Interim Report_Q2_2013.pdf