Jussi Pesonen, President and CEO of UPM comments on the results:
“Our first quarter results improved year-on-year. This was an excellent achievement considering the headwind in the European energy and paper markets. The results were underpinned by our profit improvement actions as well as by favourable exchange rates. In the upcoming quarters, the profit improvement programme and growth projects will continue to strengthen our results. I’m particularly pleased with the excellent drive in UPM Biorefining and UPM Plywood during Q1. In both businesses, good demand supported the strong performance. Both businesses are also set to expand their bottom line through ongoing investments in the Kymi pulp mill and the Otepää plywood mill. The Lappeenranta biorefinery started customer deliveries of renewable diesel during the first quarter. Production ramp-up is still in its early stages but, based on the experience so far, both the technology and business case are valid.
UPM Raflatac and UPM Paper Asia had a stable quarter with good performance. UPM Raflatac enjoyed favourable markets and the ongoing investments in China and Poland will help us respond to demand growth during 2015. UPM Paper Asia investment in label materials and speciality papers in Changshu has progressed well and will be finalised by the end of the year. UPM Energy and UPM Paper ENA (Europe & North America) faced challenging markets. UPM Energy was impacted by lower energy prices, as well as lower hydropower and nuclear volumes. As for paper, lower publication paper prices and deliveries, as well as increased pulp costs, materialised in Europe as expected. In UPM Paper ENA, we started a restructuring process in the autumn, and permanently closed three paper machines in Europe during the first quarter. This, combined with the seasonal improvement, will positively impact Paper ENA performance as the year progresses.
All in all, UPM is well positioned for the upcoming quarters. The profit improvement programme will still deliver more than EUR 100 million in annualised cost savings by the end of this year. We have a portfolio of well-performing businesses with several high-return growth projects coming on-stream by the end of this year, bringing a further improvement in next year’s bottom line. And our strong balance sheet allows us to act on strategic opportunities,” says Pesonen.
Outlook for 2015
The improved profitability achieved in 2014 is expected to continue in 2015, and there are prospects for further improvement. Profitability is underpinned by the EUR 150 million profit improvement programme, as well as the first positive impact from the company’s growth projects. Profitability is affected by lower publication paper prices and lower electricity sales prices in the beginning of the year. The current weakened euro and lower oil price are supportive of the company’s earnings.