UPM Half-Year Financial Report 2020

Q2 2020 highlights
*Sales decreased by 20% to EUR 2,077 million (2,605 million in Q2 2019) due to lower deliveries of graphic papers and lower pulp and paper sales prices
*Comparable EBIT decreased by 41% to EUR 203 million (345 million), and was 9.8% (13.2%) of sales
*The COVID-19 lockdowns significantly decreased demand for graphic papers
*Demand for labelling materials and specialty papers increased during the lockdowns
*Operating cash flow was EUR 156 million (436 million)
*Closures of UPM Chapelle paper mill and UPM Jyväskylä plywood mill

H1 2020 highlights
*Sales decreased by 18% to EUR 4,364 million (5,298 million in H1 2019) due to lower deliveries of graphic papers and lower pulp and paper sales prices
*Comparable EBIT decreased by 33% to EUR 482 million (719 million), and was 11.0% (13.6%) of sales
*UPM’s transformative pulp project in Uruguay and biochemicals project in Germany are well on track with the planned start-up timeline
*Operating cash flow was EUR 293 million (756 million)
*Net debt decreased to EUR 301 million (366 million)
*Cash funds and unused committed credit facilities totalled EUR 2.0 billion at the end of June

Jussi Pesonen, President and CEO, comments on the Q2 2020 results:
“In the second quarter of 2020 people and businesses around the world felt the impact of the COVID-19 pandemic and the related lockdowns. For UPM the impact was divided. Demand for graphic papers seriously suffered as a result of lockdowns, whereas labels and specialty papers saw strong demand and delivered excellent results. Our financial standing remains strong, and our strategic growth projects continue as planned.

We have taken proactive and extensive precautions to ensure the safety of our employees and continuity of our operations. Consequently, few UPM employees have been infected and we have been able to serve our customers without interruption. This is a great achievement and has enabled satisfactory results in highly exceptional circumstances.

Our sales decreased by 20% to EUR 2,077 million and comparable EBIT by 41% to EUR 203 million. Operating cash flow was EUR 156 million. Net debt decreased from last year to EUR 301 million and liquidity totalling EUR 2.0 billion.

The lockdown of businesses, offices and schools caused a drastic decline in printed advertising and use of office papers. In Europe, Q2 demand for graphic papers decreased by 32% from last year. We achieved significant savings in fixed costs, but this could not offset the headwind from the markets. UPM Communication Papers’ quarterly EBIT was negative for the first time in five years.

At the same time lockdowns had a positive impact on some of UPM’s businesses. UPM Raflatac and UPM Specialty Papers benefited from strong demand for daily consumer goods and growth in e-commerce, increasing the need for labelling and packaging solutions. In Europe, Q2 demand for self-adhesive labels grew by 10% compared to last year. The favourable markets combined with long-term efforts to improve margins resulted in excellent profits in both business areas.

In UPM Biorefining, pulp deliveries were strong in Q2. Due to the pandemic, maintenance shutdowns were postponed until Q4 and our pulp mills were running at full capacity. However, prices remain low and the results leave room for improvement.

UPM Energy achieved good results despite lower prices in highly volatile markets. UPM Plywood had a relatively solid quarter, but the market for birch plywood remains weak.
details at: https://www.upm.com/about-us/for-media/releases/2020/07/upm-half-year-financial-report-2020-q2-impacted-by-lockdowns-transformative-growth-projects-on-track/

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