UPM Half Year Financial Report 2023
Q2 2023 highlights
• Sales were EUR 2,558 million (2,562 million in Q2 2022)
• Comparable EBIT decreased by 71% to EUR 114 million, 4.5% of sales (387 million, 15.1%)
• Delivery volumes were impacted by destocking in various product value chains
• Pulp and energy prices decreased to cyclical bottom levels
• Operating cash flow was EUR 459 million (-879 million), supported by cash inflow from energy hedges
• UPM Paso de los Toros pulp mill in Uruguay ramping up production according to the plan
• The OL3 nuclear power plant unit began regular commercial electricity production
• Permanent closures of PM6 at UPM Schongau, Germany and PM4 at UPM Steyrermühl, Austria
Jussi Pesonen, President and CEO, comments on the results:
“During the first half of the year the business environment was exceptional. Geopolitical uncertainty, low economic activity and high inflation were impacting consumers. At the same time, the extraordinary destocking in product value chains continued in our industry. Consequently, we saw a strong and rapid downturn in the markets. Deliveries of our products were well below estimated end-use demand, and global commodity prices, such as pulp and energy, fell from historic highs to cyclical bottom levels in six months.
Therefore, our Q2 result was disappointing. Our sales were EUR 2,558 million, at the level of the previous year. Comparable EBIT decreased to EUR 114 million (Q2 2022: EUR 387 million). On top of market challenges, the quarterly result was impacted by high maintenance activity in UPM Fibres, UPM Energy and UPM Biofuels, as well as the normal start-up costs of UPM Paso de los Toros. Operating cash flow was a solid EUR 459 million, supported by cash inflow from energy hedges. Our balance sheet remains very strong. Net debt decreased to EUR 2,557 million. Cash funds and unused committed credit facilities totalled EUR 6.4 billion at the end of the quarter.
In Q2, market shipments for most of our products were substantially below long-term averages impacted by continued destocking. In an environment of low volumes and decreasing prices, UPM Communication Papers and UPM Plywood performed well. UPM Raflatac and UPM Specialty Papers succeeded in unit margin management, but results were weak due to continuously low volumes. Volumes for UPM Fibres and UPM Energy increased, but prices declined significantly from comparison periods.
On the positive side, in Q2 our lower variable input costs contributed positively to the result. We have responded to challenging markets by continuing agile margin management and taking swift cost cutting measures. Permanent and temporary layoffs, flexible working hours and restructuring activities are being undertaken across UPM businesses. During the quarter, UPM Communication Papers permanently closed PM6 at UPM Schongau, Germany, and PM4 at UPM Steyrermühl, Austria. The business will continue adjusting its capacity to meet profitable customer demand in line with its strategy and long-term market outlook.
With these measures and our highly competitive production assets, UPM is well placed to benefit once volumes start to recover to more normal levels.
details at: https://www.upm.com/about-us/for-media/releases/2023/07/upm-half-year-financial-report-2023-strong-downturn-in-markets-pushed-q2-results-to-exceptional-lows–transformation-continues/