upm results q3 2015 · q3 2015 –good progress continued eur million q3 2015 q3 2014 q2 2015 9m...
TRANSCRIPT
Jussi Pesonen
President and CEO
27 October 2015
UPM RESULTS Q3 2015
| © UPM
Momentum for improvement continued in
Q3 2015
Comparable(* operating profit increased to EUR 242m (235m),
operating profit excluding special items was EUR 507m
+ Profit improvement programme ahead of schedule
+ Favourable currencies
− Currency hedges affected UPM Paper ENA and UPM Paper Asia
− Publication paper prices in Europe, electricity sales prices below last year
Strong operating cash flow at EUR 363m (300m)
Growth projects progressed well – Kymi pulp mill expansion started,
Changshu speciality paper production unit due to start up in Q4 2015
Net debt decreased to EUR 2,465m (2,726m)
2
(* excluding special items and the EUR 265 million
increase in the fair value of the forests in Finland
| © UPM
Net debt
EUR 2,465m -261m
Sales
EUR 2,530m +5%
EBITDA
EUR 345m +1m
Q3 2015 – improvement continued
Operating cash flow
EUR 363m +63m
3
Operating profit (*
EUR 242m +7m
Profit before tax (*
EUR 227m +14m
Operating cash flow / share, 12 month
EUR 2.36 +0.40
Net debt / EBITDA
1.87x -0.26x
Q3 2015 vs. Q3 2014:
EPS (*
EUR 0.36 +0.04
ROE (*
10.0% +0.9pp
(* excluding special items. The figures also exclude the EUR 265 million increase in the fair value
of the forests in Finland and hence, deviate from the official UPM formulae for financial indicators.
| © UPM
Profit improvement programme proceeded
ahead of schedule
0
50
100
150
200
Q314 Q414 Q115 Q215 Q315 Q415 Q116
4
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
closures (*
(* 800,000 tonnes of publication paper capacity in Europe: three paper
machines were closed in Q1 15, one machine was closed in Q2 15
EUR million
96% realised
in Q3 2015
| © UPM
0
50
100
150
200
250
300
350
400
450
EBITDA
Q3/14
EBITDA
Q3/15
EBITDA in Q3 2015 vs. Q3 2014
Raflatac
Paper
Asia
Other
operations
and
eliminations
Energy
Biorefining
Paper
ENA
Plywood
0
50
100
150
200
250
300
350
400
450
EBITDA
Q3/14
EBITDA
Q3/15
EURm
Prices
Variable
costs
Fixed
costs
Deliveries
Profit improvement actions and
currencies outweighed the decrease
in sales prices EURm
Favourable pulp markets and currencies
benefited UPM Biorefining. Increased
pulp costs and currency hedges
impacted the paper businesses
5
34414.2%
34513.6%
Currency,
net
impact
34414.2%
34513.6%
| © UPM
Operating profit *) by business area
6
0
2,5
5
7,5
10
12,5
0
10
20
30
40
50
Q1 1
3Q
2 1
3Q
3 1
3Q
4 1
3Q
1 1
4Q
2 1
4Q
3 1
4Q
4 1
4Q
1 1
5Q
2 1
5Q
3 1
5
0
5
10
15
20
25
0
25
50
75
100
125
Q1 1
3Q
2 1
3Q
3 1
3Q
4 1
3Q
1 1
4Q
2 1
4Q
3 1
4Q
4 1
4Q
1 1
5Q
2 1
5Q
3 1
5
0
10
20
30
40
50
0
20
40
60
80
100
Q1 1
3Q
2 1
3Q
3 1
3Q
4 1
3Q
1 1
4Q
2 1
4Q
3 1
4Q
4 1
4Q
1 1
5Q
2 1
5Q
3 1
5
0
2
4
6
8
10
0
10
20
30
40
50
Q1 1
3Q
2 1
3Q
3 1
3Q
4 1
3Q
1 1
4Q
2 1
4Q
3 1
4Q
4 1
4Q
1 1
5Q
2 1
5Q
3 1
5
-4
-2
0
2
4
6
-50
-25
0
25
50
75
Q1 1
3Q
2 1
3Q
3 1
3Q
4 1
3Q
1 1
4Q
2 1
4Q
3 1
4Q
4 1
4Q
1 1
5Q
2 1
5Q
3 1
5
0
4
8
12
16
20
0
5
10
15
20
25
Q1 1
3Q
2 1
3Q
3 1
3Q
4 1
3Q
1 1
4Q
2 1
4Q
3 1
4Q
4 1
4Q
1 1
5Q
2 1
5Q
3 1
5
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
Business area returns and long-term targets
7
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22ROCE %ROCE % (* ROCE %ROCE % CF/CE % ROCE %
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
UPM
Raflatac
UPM
EnergyUPM
Biorefining
(* shareholdings in UPM Energy
valued at fair valueLong-term return target
| © UPM
Strong cash flow
8
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
Q31
5Operating cash flow
Cash flow
after investing
activities
EUR million Cash flow, trailing 12 months
• Q3 2015 operating cash
flow was EUR 363m
(300m)
• In Q3 2015, working capital
decreased by EUR 48m
(increased by EUR 36m)
• In the last 12 months,
operating cash flow was
EUR 1,257m (1,041m), i.e.
EUR 2.36 per share
| © UPM
Balance sheet continued to strengthen
9
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
1.9
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 1.3bn at the end of Q3 2015
Repayments total EUR 0.4bn in 2015-16
| © UPM
UPM increased the fair value of its forests
in Finland by EUR 265 million
• UPM increased the fair value of its biological assets (growing trees)
in Finland by EUR 265m, due to adjusted long-term wood price
estimates and change in the discount rate
– UPM continues to estimate a declining trend of real wood prices in Finland,
although with a slightly slower rate than previously
– The pre-tax discount rate for the Finnish forests was lowered from 7.5% to 7%
• At the end of Q3 2015 the fair value of UPM's biological assets in
the balance sheet was EUR 1,726 million
– Includes the company's forests in Finland (713,000 ha) and the US (75,000 ha)
as well as the plantations in Uruguay (236,000 ha)
10 | © UPM
| © UPM
UPM confirms its full year 2015 outlook
• 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, favourable currencies, 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, compared to 2014.
| © UPM11
| © UPM
Growth projects near completion – focus turns
to reaping the benefits in 2016 and beyond
12
Lappeenranta
biorefinery
120m litres of
renewable diesel
UPM Plywood
Otepää mill
expansion
to 90,000m3
Kymi
pulp mill
expansion
170,000t
UPM Raflatac
50% expansion in
APAC, growth in filmic
labelstock in Poland
UPM Paper Asia
Changshu
new speciality
paper machine
360,000t
Pietarsaari
pulp mill
expansion
70,000t
Fray Bentos
pulp mill
expansion
100,000t
Kaukas
pulp mill efficiency
improvement, paper and
pulp decoupling completed
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Capex so far EUR 514m Remaining capex EUR 256m
| © UPM
| © UPM
Low investment needs in existing assets allow
growth projects with modest total capex
13
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
Performance improvement continued in Q3 2015
• Operating profit, operating cash flow and balance sheet
stronger than last year
UPM is well positioned for next year
• Profit improvement programme is delivering results
• Growth projects are about to start contributing: Kymi and
other pulp mill expansions, Changshu speciality paper
machine, Lappeenranta biorefinery ramp-up
• Impact of favourable currencies, as hedges roll over
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
14
| © UPM
1. Profit
improvement
programme
EUR 150m
UPM strategy in action
15
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
16
Top performanceIndustry-leading
balance sheet
Attractive dividend
Strong cash flowFocused
investments
| © UPM
Q3 2015 – good progress continued
EUR million Q3
2015
Q3
2014
Q2
2015
9M
2015
9M
2014 2014
Sales 2,530 2,415 2,548 7,564 7,337 9,868
EBITDA 345 344 317 987 972 1,306
% of sales 13.6 14.2 12.4 13.0 13.2 13.2
Operating profit (* 507 235 227 938 617 847
Profit before tax (* 492 213 203 877 558 774
Earnings per share, EUR (* 0.76 0.32 0.33 1.38 0.85 1.17
ROE, % (* 20.7 9.1 9.1 12.7 8.0 8.3
Operating cash flow 363 300 324 795 779 1,241
Net debt 2,465 2,726 2,635 2,465 2,726 2,401
Gearing, % 31 36 35 31 36 32
18
(* excluding special items
| © UPM
Cash flow
EUR million Q3/15 Q3/14 Q2/15 9M/15 9M/14 2014
EBITDA 345 344 317 987 972 1,306
Cash flow before change in working capital
352 366 357 1,001 942 1,291
Change in working capital 48 -36 31 -68 -71 73
Finance costs and income taxes -37 -30 -64 -138 -92 -123
Net cash from operating activities 363 300 324 795 779 1,241
Capital expenditure -128 -101 -112 -322 -275 -378
Asset sales and acquisitions 21 14 9 32 84 131
Cash flow after investing activities 256 213 221 505 588 994
19
| © UPM
Maturity profile and liquidity
20
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 30 September 2015 was EUR 1.3bn
(cash and unused credit facilities)
• bilateral committed credit facilities EUR 0.95bn
Committed credit facilities EUR 0.95bn
Maturity profile of outstanding debt Committed credit facilities’ maturities
| © UPM
Group profitability and targets
0
1
2
3
4
5
6
7
8
9
10
21
0
1
2
3
4
5
6
7
8
9
10
0
20
40
60
80
100
0
1 000
2 000
3 000
4 000
5 000
Operating profit excl. special items
ROEexcl. special items
Net Debt
Gearing
Max gearing
Min target
EURm %%% of sales Operating profit ROE Gearing
(*(*
(* the figures exclude the EUR 265 million increase in the fair value of the forests in Finland
in Q3 2015 and hence, deviate from the official UPM formulae for financial indicators.
| © UPM22
EBITDA Q414-Q315
EUR 1,321m
Capital employed, September 2015
EUR 11.1bn
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
Other operations
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM Plywood
UPM businesses by EBITDA generation and
capital employed
| © UPM
0
25
50
75
100
125
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
5
10
15
20
25
UPM Biorefining
23
Operating profit excluding special items
EUR million % of salesMarket review Jan-Sep 2015
• Global chemical pulp demand
remained robust and growth was well
spread over several regions
• USD-denominated NBSK pulp market
price was lower, while BHKP price was
higher than last year
• Euro-denominated pulp prices were
clearly higher than last year
• The market price difference between
NBSK and BHKP narrowed
| © UPM
UPM Energy
24
0
20
40
60
80
100
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
10
20
30
40
50
Operating profit excluding special items Market review Jan-Sep 2015
• The Nordic and Finnish hydrological
balance improved in the first half of the
year, and decreased slightly during the
third quarter. At the end of September, the
hydrological balance was above the long-
term average level.
• Due to mild temperatures and improved
hydrology the average Finnish area spot
price was clearly lower compared with
than the same period last year
• The Finnish area front-year forward
electricity price closed at EUR 29.7/MWh
in September, down 24% compared to the
end of September last year
EUR million % of sales
| © UPM
UPM Raflatac
25
0
10
20
30
40
50
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
2
4
6
8
10
Operating profit excluding special items Market review Jan-Sep 2015
• Global demand for self-adhesive label
materials increased
• Demand was robust in Europe and
North America. In Asia and Latin
America, growth continued, albeit at a
lower level.
EUR million % of sales
| © UPM
UPM Paper Asia
26
0
10
20
30
40
50
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
0
3
6
9
12
15
Operating profit excluding special items Market review Jan-Sep 2015
• Growth in fine paper demand is
levelling off, office paper demand is
growing
• Overcapacity prevails and the
preliminary US anti-dumping duties are
adding regional supply
• The average market price in local
currencies were slightly lower in most of
the markets, compared to 2014.
• The demand for labelling materials
grew globally, and average prices
remained stable
EUR million % of sales
| © UPM
UPM Paper ENA
27
-40
-20
0
20
40
60
80
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
-4
-2
0
2
4
6
8
Operating profit excluding special items Market review Jan-Sep 2015
Europe
• Demand for graphic papers decreased
by 4%
• Publication paper prices were 5% lower
• Fine paper prices were 3% higher
North America
• Demand for magazine papers
decreased by 7%
• The average US dollar price for
magazine papers was 1% higher
EUR million % of sales
| © UPM
UPM Plywood
28
-5
0
5
10
15
20
Q1 12
Q3 12
Q1 13
Q3 13
Q1 14
Q3 14
Q1 15
Q3 15
-5
0
5
10
15
20
Operating profit excluding special items Market review Jan-Sep 2015
• Plywood demand continued to
strengthen somewhat in the first nine
months of 2015
• Compared with last year, demand grew
in both industrial applications and
construction-related end-use segments
EUR million % of sales
| © 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
Q3 NBSK pulp price decreased 1% from Q2
Q3 BHKP pulp price increased 3% from Q2
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
1000
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
News SC LWC
WFC WFU
EUR/t
Europe
400
500
600
700
800
900
1000
1100
1200
1300
Jan-
08Ja
n-09
Jan-
10Ja
n-11
Jan-
12Ja
n-13
Jan-
14Ja
n-15
News SC LWC
WFC WFU
USD/t USD/t
ChinaNorth America
Sources: PPI, RISI
Graphic paper prices
400
500
600
700
800
900
1000
1100
1200
1300
WFC r (100% chemical pulp)
Reels (mixedchemical/mechanical pulp)
Uncoated Woodfree Reels (100%chemical pulp)
| © UPM
1 500
2 000
2 500
3 000
3 500
4 000
Q1
10Q
3 10
Q1
11Q
3 11
Q1
12Q
3 12
Q1
13Q
3 13
Q1
14Q
3 14
Q1
15Q
3 15
33
1 500
2 000
2 500
3 000
3 500
4 000
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
5Q
3 1
5
Sources: Cepiprint/fine, PPPC
Fine papers demand
in Europe -2% 9M 2015
-1%
Graphic papers demand in Europe decreased
by 3% in Q3 and 4% in 9M 2015 from last year
'000 tonnes
1 500
2 000
2 500
3 000
3 500
4 000
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
5Q
3 1
5
Newsprint demand
in Europe -7% 9M 2015Magazine papers demand
in Europe -5% 9M 2015
-5% -5%
| © 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
| © UPM
Overcapacity in European graphic paper
is visible in margins
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
35
Cash cost of a marginal producer
Price
EUR/t
Sources: PPI, RISI, Pöyry