Embed Size (px)
Citation preview
UPM Half Year Financial Report 2021Jussi Pesonen
President and CEO
22 July 2021
| © UPM
Q2 2021: earnings improved rapidly, UPM is fit for future growth
• Sales grew by 15% to EUR 2,384m
(2,077m in Q2 2020)
• Comparable EBIT increased by 51% to
EUR 307m, 12.9% of sales (203m, 9.8%)
• Demand for UPM’s products was strong and
overall, price increases more than offset rising
input costs
• Following the timely actions taken in H2 2020
costs were competitive and asset utilisation
good
• Transformative growth projects on schedule and
on budget
2
0
50
100
150
200
250
300
350
400
450
Comparable EBITEURm
203
307
| © UPM
Our focus areas
+
ENSURING
PERFORMANCE
TRANSFORMATIVE
GROWTH PROJECTS
3
| © UPM
Strong market demand for most UPM products, with mixed COVID-19-related impacts
• UPM Raflatac and UPM Specialty Papers benefit from strong demand for daily consumer goods and growth in e-commerce
– 2021: self-adhesive label demand growth in Europe is estimated to have continued in Q2 from last year’s good level, +1% in Q1
– 2020: +7% in Q1, +9% in Q2, -4% in Q3 and +6% in Q4
• Good pulp demand in Europe, slowing demand growth in China in H1 2021, after strong year 2020
• Strong demand for plywood and timber in construction end uses, improving demand in industrial applications
• UPM Communication Papers’ market demand was good
– 2021 graphic paper demand in Europe: +28% in Q2, -14% in Q1
– 2020: -8% in Q1, -32% in Q2, -18% in Q3 and -14% in Q4
4
| © UPM5
0
100
200
300
400
500
Q1/21 Q2/21
0
100
200
300
400
500
Q2/20 Q2/21
Prices
Variable
costs
Fixed
costs
Volumes
2039.8%
30712.9%
Currency,
net
impact
Prices
Variable
costs
Fixed
costs
Volumes Currency,
net
impact
Depreciation,
forests,
plantations,
other
Comparable EBIT in Q2 2021
27912.5%
30712.9%
Depreciation,
forests,
plantations,
other
EURm EURm
| © UPM
Comparable EBIT by business area
6
0
3
6
9
12
15
18
21
0
10
20
30
40
50
60
70
0
5
10
15
20
25
30
35
0
40
80
120
160
200
240
280
0
3
6
9
12
15
18
21
0
10
20
30
40
50
60
70
-2
0
2
4
6
8
10
12
14
-20
0
20
40
60
80
100
120
140
EURm % of sales
UPM Specialty Papers
EURm % of sales
UPM Communication Papers
EURm % of sales
EURm % of sales
UPM Raflatac
EURm % of salesEURm % of salesUPM Biorefining
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70UPM Energy
0
7
14
21
0
10
20
30UPM Plywood
| © UPM
Timely action to ensure performance
• Competitive costs and good asset utilisation following
the timely actions taken in H2 2020
– Closures of UPM Jyväskylä, UPM Chapelle, UPM Kaipola,
conversion of UPM Nordland PM2
– Streamlining and cost efficiency actions in
UPM Communication Papers, UPM Biorefining, UPM
Specialty Papers, UPM Raflatac and global functions
– Upcoming sale of UPM Shotton by the end of Q3 2021
• Total graphic papers capacity reduction 1.4 million
tonnes
• Total annual cost savings impact of approx. EUR 160
million, of which approx. 75% had been realised in Q2
2021
7
| © UPM
Robust cash flow
8
• Q2 2021 operating cash flow was
EUR 308m (156m in Q2 2020)
• Working capital increased seasonally by
EUR 72m (increased by 75m in Q2 2020)
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2014 2015 2016 2017 2018 2019 2020 LTM
Cash flow
Free cash flow
Operating cash flow
EURm
| © UPM
Net debt and leverage
• Net debt EUR 750m at the end of Q2 2021
• Cash funds and committed credit facilities
EUR 2.5bn at the end of Q2 2021
• UPM issued a EUR 500m Green Bond in
Q1 2021
• No financial covenants
Strong financial position
9
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
-750
0
750
1 500
2 250
3 000
3 750
4 500
Net debt/EBITDA (x)
Net debtEURm
Policy: ≤ 2x
| © UPM| © UPM| © UPM
Outlook for 2021
10
• The global economy has started recovering in 2021 from the deep downturn experienced in 2020. World regions
will progress at different pace, and China has led this development. Demand for most UPM products is influenced
by overall economic activity and hence, depends on the shape and rate of the economic recovery.
• The COVID-19 pandemic continues to cause uncertainty in 2021. In 2020, lockdowns had a significant negative
impact on graphic paper demand but supported the strong demand for self-adhesive labelling materials and
specialty papers. Opening of the economies is likely to allow for some normalisation of these demand impacts.
• Sales prices for many UPM products are expected to increase in H2 2021 from H1 2021, including graphic paper
prices in Europe. Pulp sales prices increased rapidly in H1 2021 and are expected to be higher on average in H2
2021 than in H1 2021.
• With improving global economy, many variable cost items are expected to increase in 2021. UPM will continue to
manage margins with product pricing, optimising its product and market mix, efficient use of assets as well as by
taking measures to improve variable and fixed cost efficiency.
• UPM’s comparable EBIT is expected to increase both in H2 2021 compared with H1 2021 and increase clearly in
the full year 2021 compared with 2020.
| © UPM
Our focus areas in the coming quarters
+
ENSURING
PERFORMANCE
TRANSFORMATIVE
GROWTH PROJECTS
11
| © UPM
Long-term value creation driven by our spearheads for growth
12 | © UPM
| © UPM
Spearheads for growth – improving business mix drives earnings, cash flow and shareholder value
Sales 2009 Transformation Sales 2019 Spearheads for growth Future sales
13
16%
5%
6-year average
EBIT margin
(2015-20)
EBIT
margin
>20%*)
65%
35%
Communication
Papers
60%
40%
Spearheads
for growth*)
Operating model
Performance
Balance sheet
Focused growth
Innovation
Gross sales
2009
Gross sales
2020
Future sales *)Transformation
1. phase
Transformation
2. phase
*) This is an illustration,
not a forecast
Growing
businesses
EUR 9.6bn EUR 9.4bn
| © UPM| © UPM| © UPM
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
-750
0
750
1 500
2 250
3 000
3 750
4 500
2009 2011 2013 2015 2017 2019 LTM
Net debt/EBITDA (x)
Net debt and leverage
Net debtEURm
Transformation is visible in earnings and balance sheet
14
0
200
400
600
800
1 000
1 200
1 400
1 600
2009 2011 2013 2015 2017 2019 2xH121
EURm Comparable EBIT
0
2
4
6
8
10
12
14
2009 2011 2013 2015 2017 2019 H121
% Comparable ROE
Target: 10%Target: EBIT growth
Policy: ≤ 2x
| © UPM| © UPM| © UPM
Transformative growth projects in the most intensive phase in 2021
15
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Depreciation
Operational investments
Strategic investments
Uruguay
acquisition
Myllykoski
acquisition
Capital expenditure EstimateEURm
Paso de los Toros
and LeunaCapex estimate for 2021
• Total EUR 2,000m
• Includes EUR 1,800m on
the transformative growth
projects, pulp in Uruguay and
biochemicals in Germany
• Operational investment
needs consistently low
903
| © UPM
Progress in UPM Paso de los Toros and the Montevideo port
16
| © UPM
Progress in UPM Leuna
17
| © UPM18
Strong performance in the specialty packaging materials businesses
• Growing markets in the packaging value chain, driven by
global megatrends, sustainability and e-commerce
• Innovation-driven, technically demanding segments, where
UPM has strong position and expertise
• UPM Raflatac and UPM Specialty papers comprise 31% of
UPM’s H1 2021 sales and 37% of comparable EBIT
– Comparable EBIT margins of 16% and 13% in H1 2021
– Attractive ROCE, Raflatac 47%, Specialty Papers 22%
• Focused investments: UPM Nordland PM2 conversion,
UPM Changshu expansion, linerless labelstock expansion
| © UPM
We deliver positive impact to mitigate climate change and to create long-term value
WE ACT THROUGH EFFICIENCY
AND EMISSIONS
Our target is to reduce our CO2 emissions
by 65%.
WE ACT THROUGH PRODUCTS
We innovate novel products to provide ever
more sustainable alternatives for fossil-
based materials.
WE ACT THROUGH FORESTS
We are committed to climate-positive
forestry and enhancing biodiversity.
| © UPM
Summary
• UPM improved its earnings rapidly in Q2 2021 – comparable EBIT is
expected to increase clearly in 2021 from 2020
• Q2 2021 showed strong demand for most UPM products
• Overall, price increases more than offset rising input costs
• Competitive costs and good asset utilisation following the timely actions
taken in H2 2020
• Transformative growth projects progress on schedule and on budget
• UPM is committed to providing solutions for mitigating climate change
20
| © UPM22 | © UPM
Biofore strategy drives our transformation as the frontrunner of bioeconomy
A FUTURE
BEYOND FOSSILS
GROWTH• We respond to megatrends and meet customers’ changing needs
• Creating new markets and enabling sustainable choices
PORTFOLIO• Investing in businesses with strong long-term fundamentals
for growth and high barriers to entry
• Effective capital allocation
PERFORMANCE• Continuous improvement
• Agile operating model
INNOVATION• Creating new business and
competitive advantage
• Replacing fossils with
biomaterials
RESPONSIBILITY• Renewable & sustainable
solutions
• Responsible operations
and value chain
| © UPM
Our positive impact receives recognition
23 | © UPM
Pulp mill in Paso de los
Toros, deep sea port
terminal in Montevideo
and local community
USD 3 billion
investment in
Uruguay
UPM invests in a world class pulp mill in Uruguay
Total annual
capacity of 2.1
million tonnes of
eucalyptus pulp
Scheduled to
start up in H2
2022
Pulp is used in
tissue, specialty
and packaging
papers, for example
24 | © UPM
| © UPM
Transformative step in UPM’s pulp business and in UPM’s future earnings
• Significant step for UPM’s future earnings
– One of the most competitive mills in the world
– Expected cash cost level of USD 280 per
delivered tonne of pulp(*
– Attractive returns in various market scenarios
– Carefully prepared to ensure long-term
competitiveness and to minimise risks both in the
project phase and during continuous operations
• Step change in UPM’s pulp business
25*) including variable and fixed costs of plantation operations, wood
sourcing, mill operations and logistics delivered to the main markets
2019 2023
UPM Pulp capacity
3.7mt/a
Northern
softwood
Northern
hardwood
Eucalyptus
5.8mt/a
26 | © UPM
UPM invests in next generation biochemicals
Total annual
capacity of
220,000 tonnes
Industrial scale
biorefinery
Alternatives to fossil
materials in various
consumer-driven
end-uses
EUR 550
million
investment
at Leuna,
Germany
Scheduled to
start up by the
end of 2022
| © UPM27 | © UPM
UPM creates a totally new sustainable business with large growth potential
• Major milestone in UPM’s transformation
• UPM biochemicals respond to the customers’
increasing needs for renewable alternatives
• Current supply is limited and high-quality
biochemicals are priced at a premium
• Sustainable wood supply, unique technology,
existing infrastructure and proximity to customers
enables a good cost position
• Attractive returns: ROCE target of 14% once
the facility is fully ramped up and optimised
28 | © UPM
Growth plans in biofuels progress to the next stage
Capacity would be
500,000t of
renewable fuels incl.
sustainable jet fuel
Potential next
generation
biofuels
biorefinery
Products would
significantly reduce carbon
footprint in the road
transport and aviation
Basic
engineering
phase of new
biorefinery
ongoing
Potential location in
Kotka, Finland
or Rotterdam,
the Netherlands.
| © UPM
Cellulosic fuels
Renewable diesel, gasoline
and jet fuel
Carbon stored to soil in each cycle
NEW SUSTAINABLE BIOMASS
Sustainable and uniquely upstream integrated
feedstock pool
• Additionality
• Climate-positive land use
CLIMATE-POSITIVE FUELS
Efficient carbon neutral production
DECARBONIZED TRANSPORT
AND PETROCHEMICALS
Flexibility to create maximum value from
several end uses and market geographies
E-fuels future
potential
UPM Biofuels’ competitive edge to be built on resilient ecosystem and agility to select markets
29
| © UPM
2006 2012
UPM announces its
plans to become a
significant producer
of advanced biofuels
First investment
decision UPM
Lappeenranta
Biorefinery
Renewable diesel
made from
crude tall oil
20182015
UPM Lappeenranta
Biorefinery starts
commercial production
Sales of
UPM BioVerno
launched in Finland
2021
Basic engineering
starts
Two alternative sites:
Kotka and Rotterdam
Several technical scopes
30
Strong track record in biofuels
Feasibility study
EIA-study of a
possible new
biorefinery at Kotka
30
| © UPM
Maturity profile and liquidity
31
Liquidity on 30 June 2021 was EUR 2.5bn (cash and unused committed credit facilities)
UPM’s committed credit facilities:
• EUR 158m rolling committed overdraft facility maturing 2022
• EUR 750m committed syndicated revolving credit facility of which EUR 50m maturing 2025 and EUR 700m maturing 2026
No financial covenants
0
200
400
600
800
1 000
EURm
Unused committed credit facilities (EUR 908m)
Leases (EUR 545m)
Bonds (EUR 1566m)
Loans (EUR 387m)
| © UPM32
Maintenance shutdowns in 2020 and 2021
Maintenance shutdowns have an impact on
• Maintenance costs
• Production volumes
• Operational efficiency
Significant maintenance shutdowns
in 2020 and 2021
Timing Unit
Q2 20 Olkiluoto nuclear power plant
Q4 20 Kaukas pulp mill
Pietarsaari pulp mill
Q2 21
Q4 21
Olkiluoto nuclear power plant
Fray Bentos pulp mill
Kymi pulp mill
| © UPM33
UPM’s main currency exposures
• 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
USD GBP JPY Others
EURm 905 300 180 270
| © UPM34
300
500
700
900
1100
1300
1500
USD/tonne
BHKP, Europe NBSK, Europe
BHKP, China NBSK, China
Chemical pulp market prices
300
400
500
600
700
800
900
1000
1100
1200
EUR/tonne
BHKP, Europe, EUR NBSK, Europe, EUR
BHKP, China, EUR NBSK, China, EUR
UPM Biorefining
Pulp market prices, USDPulp market prices, EUR
Source: FOEX Indexes Ltd
| © UPM35
UPM Energy
Cost efficient generation enables robust profitability in changing market environment
0
10
20
30
40
50
60
2014 2015 2016 2017 2018 2019 2020 2021
EUR/MWhMarket electricity prices vs UPM sales price
Helsinki Front Year System Front Year UPM average sales price
UPM Energy
profitability2016 2017 2018 2019 2020 H1/2021
Comparable EBIT,
EURm116 91 123 185 171 91
% of sales 32.7 28.8 31.5 44.4 45.0 42.7
| © UPM36
400
500
600
700
800
900
1000
1100
News SC LWC
WFC WFU
Graphic paper prices
EUR/tEurope
USD/t USD/tChinaNorth America
500
600
700
800
900
1000
1100
1200
1300
WFC r (100% chemical pulp)
Uncoated Woodfree Reels (100% chemicalpulp)
500
600
700
800
900
1000
1100
1200
1300
News SC LWC
WFC WFU
UPM Communication Papers
Sources: PPI, RISI
| © UPM
Paper price vs. cash cost of marginal cost producer
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
37
EUR/t
Cash cost of a marginal producer
Price
UPM Communication Papers
Sources: PPI, RISI, AFRY
