Interim report Q1/2016: Growth projects and cost efficiency measures deliver improved earnings

Interim report Q1/2016: Growth projects and cost efficiency measures deliver improved earnings

Jussi Pesonen, President and CEO, comments on the Q1 result: “All in all, 2016 got off to a very good start. During the first quarter, we achieved a good level of operational efficiency, we were able to lower our costs significantly and the market environment was mostly favourable. Our comparable EBIT increased by 34% year-on-year to reach a record level in years. In addition, our cash flow was particularly strong, driving net debt further down.

The first quarter showed the full impact of last year’s cost efficiency measures. Costs decreased in all businesses, but the impact was particularly visible in UPM Paper ENA‘s improved profitability. Our customers continued to rely on us with their business, while we improved operational efficiency significantly by closing up 800,000 tonnes of capacity.

Market demand continued to develop mostly favourably. We were able to respond to the increased customer demand with our growth projects in UPM Biorefining, UPM Paper Asia and UPM Raflatac. The ramp-ups started well and contributed to the deliveries and earnings.

Our work continues to realise the full earnings potential from the completed growth projects. Additionally, we will finalise the ongoing projects in Otepää plywood mill in Estonia and UPM Kaukas pulp mill in Finland. We will continue implementing our cost efficiency measures across all businesses. In the case of UPM Paper ENA, we are ensuring competitiveness by closing Madison Paper Industries in the US and selling UPM Schwedt paper mill in Germany.

We look confidently forward. Our balance sheet and cash flow are strong and put us in a good position to act on future opportunities.”

Outlook for 2016

UPM’s profitability improved in 2015 and the improvement is expected to continue in 2016. The business performance is underpinned by the company’s growth projects and continuous cost efficiency measures.

UPM’s growth projects are expected to contribute positively to the company’s earnings in 2016, compared with 2015. UPM continues its measures to reduce variable and fixed costs also in 2016. Currencies are expected to contribute positively as hedges roll over, assuming relevant currencies stay at the same level as at the end of 2015.

In the picture: Jussi Pesonen, President and CEO of UPM

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