UPM Q2 RESULTS 214 Jussi Pesonen President and CEO 5 August 214
Successful profit improvement programme prompted strong Q2 214 results Q2 214 vs. Q2 213: Sales EUR 2,441m -3% EBITDA EUR 298m +4m Operating profit ( * EUR 186m +48m Profit before tax ( * EUR 169m +49m EPS ( * EUR.26 +.6 H1 214 vs. H1 213: Operating profit ( * EUR 382m +1m Operating cash flow EUR 479m +292m Net debt EUR 2,925m -599m Gearing 4% -8pp Net debt / EBITDA 2.4x -.6x 2 UPM ( * excluding special items
Profit improvement programme progressing fast 25 2 15 1 5 Full impact of the programme is expected by the end of 214 as compared with the Q2/13 results 94% achieved in Q2/14 EUR 2m of annualised fixed and variable cost savings Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 3 UPM
EBITDA in H1 214 vs. H1 213 Significant cost savings Currencies, pulp and paper prices had a negative impact 8 Significant improvement in UPM Paper ENA and UPM Plywood, UPM Biorefining lower due to pulp price, maintenance 8 7 6 5 4 542 1.9% Prices, currencies Deliveries Fixed costs Variable costs Elimin. 611 12.4% 7 6 5 4 542 1.9% Biorefining Energy Raflatac Paper Asia Paper ENA Plywood Other operations and eliminations 611 12.4% 3 3 2 2 1 1 EBITDA H1/13 EBITDA H1/14 EBITDA H1/13 EBITDA H1/14 4 UPM
Operating profit * ) by business area EURm 1 UPM Biorefining % of sales 2 EURm 1 UPM Energy % of sales 5 EURm 5 UPM Raflatac % of sales 1 8 16 8 4 4 8 6 12 6 3 3 6 4 8 4 2 2 4 2 4 2 1 1 2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 12 12 13 13 13 13 14 14 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 12 12 13 13 13 13 14 14 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 12 12 13 13 13 13 14 14 EURm 5 UPM Paper Asia EURm UPM Paper ENA % of sales EURm UPM Plywood % of sales % of sales 1 6 6 2 12 4 8 4 4 15 9 3 6 2 2 1 6 2 4 5 3 1 2-2 -2 Q3 Q4 Q1 12 12 13 5 UPM Q2 Q3 Q4 Q1 Q2 13 13 13 14 14 * ) excluding special items -4 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 12 12 13 13 13 13 14 14-4 -5 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 12 12 13 13 13 13 14 14-3
Q18 Q38 Q19 Q39 Q11 Q31 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Strong cash flow 1 4 1 2 1 8 6 4 Cash flow, trailing 12 months Cash flow after investing activities Operating cash flow Q2 214 operating cash flow was EUR 215m (84m) Last 12 months operating cash flow was EUR 1,27m (867m) 2 6 UPM
Strengthening balance sheet Net debt, 5 5 Net debt / EBITDA (trailing 12 months) 4,5 Net debt, Gearing % 5 5 9 5 Net debt / EBITDA 4, 5 8 4 5 3,5 4 5 Gearing 7 4 3, 4 6 3 5 3 2,5 2.4 2, 3 5 3 5 4 4 2 5 Net debt 1,5 2 5 Net debt 3 2 1, 2 2 28 29 21 211 212 213 214 28 29 21 211 212 213 214 7 UPM Liquidity was EUR 1.8bn at the end of Q2 214 Repayments total EUR.5bn in 214
UPM business outlook is broadly stable * ) In H2 214, UPM s performance is expected to be underpinned by similar or slightly better performance in UPM Paper ENA, UPM Paper Asia, UPM Raflatac, UPM Plywood and UPM Energy, when compared to H2 213. UPM Biorefining performance in H2 214 compared to H2 213 continues to be impacted by lower chemical pulp prices. Commercial production of renewable diesel at the Lappeenranta biorefinery is expected to start during the autumn 214. The impact on UPM Biorefining earnings is expected to be minor during H2 214. 8 UPM * ) See complete wording of the "Outlook" in the Q2 214 interim report
Growth projects Lappeenranta biorefinery nearing its start Sales agreement with NEOT signed in June Construction of the biorefinery was completed in July Testing and commissioning process is ongoing Commercial production of renewable diesel is expected to start during the autumn Earnings impact is expected to be minor during H2 214 9 UPM
Growth projects 1% expansion in pulp production capacity Pietarsaari pulp mill modernisation and 7,t expansion completed in June Kymi pulp mill 17,t expansion proceeding on schedule, start-up by the end of 215 Fray Bentos pulp mill received an increased production permit, allowing a further 1,t of production. Minor investments are planned for H2/14 Further debottlenecking potential at the Kaukas pulp mill 1 UPM
Growth projects Growth in developing markets Investment in labelling materials and woodfree speciality papers at the UPM Changshu mill in China, capacity of 36,t, start-up by the end of 215 5% increase in self-adhesive labelstock coating capacity in APAC, start-up by the end of 214 Expansion of filmic labelstock production in Nowa Wies, Poland, start-up in Q1 215 11 UPM
Low investment needs in existing assets allow growth projects with modest total capex 1 2 Capital expenditure Estimate 1 Myllykoski acquisition 8 Depreciation 6 Uruguay acquisition 4 Strategic investments 329 45 2 12 UPM Operational investments 28 29 21 211 212 213 214e
Summary Strong Q2 214 results thanks to fast implementation of the profit improvement programme Strong cash flow and further strengthening balance sheet Solid progress in growth projects 13 UPM
Shifting gear in UPM transformation Business portfolio development and value creation New businesses BIOFUELS BIOCHEMICALS BIOCOMPOSITES UPM Plywood UPM Paper ENA Biofuels: Lappeenranta biorefinery Pulp: 1% capacity increase UPM Biorefining Profit improvement programme EUR 2m UPM Energy UPM Paper Asia UPM Raflatac EBITDA target for growth initiatives EUR 2m Labelling materials Changshu expansion Self-adhesive labels: advancing in growth markets and in higher value added products 14 UPM
FINANCIALS Q2 214
Q2 214 key figures 17 UPM Q2 214 Q2 213 Q1 214 H1 214 H1 213 213 Sales 2,441 2,52 2,481 4,922 4,994 1,54 EBITDA 298 258 313 611 542 1,155 % of sales 12.2 1.2 12.6 12.4 1.9 11.5 Operating profit * ) 186 146 196 382 282 683 Profit before tax * ) 169 12 176 345 249 61 Earnings per share,.26.2.27.53.38.91 EUR * ) Operating cash flow 215 84 264 479 187 735 Net debt 2,925 3,524 2,777 2,925 3,524 3,4 Gearing % 4 48 37 4 48 41 * ) excluding special items
Cash flow Q2/14 Q2/13 Q1/14 H1/14 H1/13 213 EBITDA 298 258 313 611 542 1,155 Cash flow before change in working capital 279 268 297 576 52 1,85 Change in working capital -36-119 1-35 -215-128 Finance costs and income taxes -28-65 -34-62 -1-222 Net cash from operating activities 215 84 264 479 187 735 Capital expenditure -16-69 -68-174 -167-337 Asset sales and acquisitions 1-29 69 7-36 4 Cash flow after investing activities 11-14 265 375-16 438 18 UPM
Maturity profile and liquidity Liquidity Liquidity on 3 June 214 was EUR 1.8bn (cash and unused credit facilities) Committed credit facilities EUR 1.25bn syndicated credit facility EUR 5 million bilateral committed credit facilities EUR 525 million 1 Maturity profile of outstanding debt 1 Committed credit facilities maturities 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 214 215 216 217 218 219 22-226 227 228 229 23 214 215 216 217 218 219 22-226 227 228 229 23 19 UPM
UPM Biorefining Q2 214 vs. Q2 213 Operating profit excluding special items % of sales 1 2 8 6 4 2 Q1 12 Sales Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 214 477 Q2 213 512 16 12 8 4-7% Business performance Operating profit decreased mainly due to lower hardwood pulp prices, partly due to adverse currency impact, the scheduled maintenance shutdown at the UPM Pietarsaari pulp mill and a prolonged start-up at the UPM Kaukas pulp mill following its maintenance shutdown. Pulp deliveries increased by 7% to 832, tonnes (774,). Operating profit *) *) excluding special items Q2 214 31 Q2 213 97-66 EUR million 2 UPM
UPM Energy Q2 214 vs. Q2 213 Operating profit excluding special items % of sales 1 5 8 4 6 3 4 2 Business performance Operating profit remained on last year s level as the decrease in costs offset the impact of lower average sales prices. The average electricity sales price decreased by 1% to EUR 44.5/MWh (45./MWh). 2 Q1 12 Sales Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 214 112 Q2 213 11 1 2% Operating profit *) *) excluding special items Q2 214 46 Q2 213 46 EUR million 21 UPM
UPM Raflatac Q2 214 vs. Q2 213 Operating profit excluding special items % of sales 5 1 4 8 3 6 Business performance Operating profit decreased due to temporary operational issues and currency impact. Lower fixed costs and higher delivery volumes offset the negative sales margin impact. 2 4 1 Q1 12 Sales Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 214 36 Q2 213 39 2-1% Operating profit Q2 214 17-2 *) *) excluding special items Q2 213 19 EUR million 22 UPM
UPM Paper Asia Q2 214 vs. Q2 213 Operating profit excluding special items % of sales 5 15 4 12 3 9 Business performance Operating profit increased mainly due to lower variable and fixed costs. Average sales prices were lower mainly due to negative currency impact. 2 6 1 Q1 12 Sales Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 214 285 Q2 213 289 3-1% Operating profit *) *) excluding special items Q2 214 27 Q2 213 22 5 EUR million 23 UPM
UPM Paper ENA Q2 214 vs. Q2 213 Operating profit excluding special items % of sales 6 6 4 2-2 -4 Q1 12 Sales Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 214 1,286 Q2 213 1,358 4 2-2 -4-5% Business performance Operating profit increased due to lower variable and fixed costs, to a large extent driven by the ongoing profit improvement programme. The average price for all paper deliveries in euros was approximately 1% lower than last year. Paper deliveries decreased by 4% to 2,98, tonnes (2,181,). Operating profit *) *) excluding special items Q2 214 47 Q2 213-23 7 EUR million 24 UPM
UPM Plywood Q2 214 vs. Q2 213 Operating profit excluding special items % of sales 2 12 15 9 1 6 5 3 Business performance Operating profit increased due to improved sales margin resulting from higher sales prices and lower variable costs, as well as higher delivery volumes. Deliveries increased by 4% to 199, cubic metres (191,). -5 Q1 12 Sales Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 214 118 Q2 213 111-3 6% Operating profit *) *) excluding special items Q2 214 12 Q2 213 7 5 EUR million 25 UPM