Q3 2020 highlights
• Sales decreased by 19% to EUR 2,028 million (2,493 million in Q3 2019) due to lower deliveries of graphic papers and lower pulp and paper prices
• Comparable EBIT was EUR 215 million, 10.6% of sales (342 million, 13.7%), down 37% year-over-year
• Operating cash flow was EUR 365 million (500 million)
• Successful health and safety measures enabled uninterrupted business operations and progress in transformative growth projects
• Some normalization of the COVID-19-related demand impacts, both positive and negative, in graphic papers and in labelling materials and specialty papers
• Closures of UPM Chapelle paper mill and UPM Jyväskylä plywood mill
• Announced the closure of UPM Kaipola paper mill, plans for selling UPM Shotton paper mill and streamlining in several businesses and functions
Q1–Q3 2020 highlights
• Sales decreased by 18% to EUR 6,392 million (7,791 million in Q1–Q3 2019) due to lower deliveries of graphic papers and lower pulp and paper prices
• Comparable EBIT was EUR 697 million, 10.9% of sales (1,061 million, 13.6%), down 34% year-over-year
• Operating cash flow was EUR 659 million (1,256 million)
• Net debt was EUR 89 million (-2 million)
• Cash funds and unused committed credit facilities totalled EUR 2.3 billion at the end of September
• The COVID-19 containment measures significantly decreased demand for graphic papers, while demand for labelling materials and specialty papers increased during the lockdowns
• UPM’s transformative pulp project in Uruguay and biochemicals project in Germany are well on track with the planned start-up timeline
Jussi Pesonen, President and CEO, comments on the Q3 2020 results: “During Q3 we delivered on many fronts: performance, cost reduction actions, transformative projects as well as safety and health of our personnel. We are taking action to ensure competitiveness, and our businesses delivered satisfactory performance under the highly exceptional circumstances resulting from the COVID-19 pandemic. Despite weak paper markets and low pulp prices, our profitability improved slightly compared to the previous quarter, our cash flow recovered, and our EBIT margin remained above 10%. UPM Raflatac, UPM Specialty Papers and UPM Energy continued to perform well. Our financial standing is strong and puts us in a unique position to proceed with our transformative projects with determination.
Compared to Q3 of last year, sales prices were lower across all of our business areas, and graphic paper deliveries were down by 21%, resulting in sales of EUR 2,028 million, a decrease of EUR 464 million in a single quarter. Comparable EBIT decreased by 37% to EUR 215 million. Operating cash flow totalled EUR 365 million. At the end of Q3, our net debt was very low at EUR 89 million, and cash funds and unused credit facilities totalled EUR 2.3 billion.
During Q3, UPM took forward plans for decisive restructuring and efficiency improvement. Closing of the UPM Jyväskylä plywood mill in Finland and the UPM Chapelle paper mill in France were finalised. Decision on closing the UPM Kaipola paper mill in Finland was taken in October and the plan to sell the UPM Shotton paper mill in Wales was announced. Streamlining began in the business functions of UPM Communication Papers, in Finnish pulp mills, at the UPM Tervasaari mill and at UPM Forest. In addition, UPM Raflatac and UPM’s global functions announced efficiency improvement plans in October. All of these measures combined are expected to result in annual cost savings of approximately EUR 130 million.
The implemented and announced measures are unfortunate to many UPMers, but they are nevertheless necessary to ensure performance in the short term and competitiveness in the long term. UPM is also taking measures to support transitions from job-to-job.
Demand for UPM Communications Papers has been most severely affected by COVID-19-related measures. As expected, demand in Q3 partly recovered compared to the lockdown part of Q2, but still remained low. Market prices decreased by 5%. However, thanks to the ongoing cost reduction measures and improved efficiency, the business was able to turn back to positive EBIT in Q3.
During the spring, UPM Raflatac and UPM Specialty Papers benefited from exceptionally good demand in many end-use areas, especially those related to daily consumer goods and e-commerce. During Q3, the markets somewhat normalised, but the businesses continued to perform well.
UPM Biorefining had a strong quarter in terms of pulp production and deliveries. UPM Biofuels achieved a new production record. However, pulp prices remain at very low levels, which are affecting the profitability of the business area.
more at: https://www.upm.com/investors/investor-tools/results-centre/