UPM’s good performance and favourable market demand continued
Jussi Pesonen, President and CEO:
UPM’s comparable EBIT continued on an increasing track in Q2 despite clearly higher maintenance activity during the quarter. Operating cash flow was solid at EUR 269 million and net debt decreased to EUR 1,046 million. Market demand was good and delivery growth continued in most businesses during the quarter. As expected, the higher maintenance activity resulted in temporarily higher fixed costs and lower operational efficiency. Moderate cost inflation continued but was mitigated by our own cost reduction measures and targeted price increases. Overall business conditions were favourable resulting in good performance.
UPM Biorefining benefitted from higher pulp prices, strong pulp demand and improved operational performance in UPM Biofuels. Profitability improved despite the maintenance shutdown at the UPM Pietarsaari pulp mill. UPM Raflatac and UPM Plywood maintained strong profitability and continued to show solid sales growth. UPM Specialty Papers achieved an excellent result. Thanks to the new specialty paper machine at UPM Changshu we have been able to grow the release liner business and improve our product mix even faster than expected.
UPM Paper ENA achieved a satisfactory result in the quarter most impacted by seasonal factors. Demand decline in Europe remained moderate. UPM Energy suffered from poor hydrological availability and prolonged maintenance activity at Olkiluoto power plant in Finland. As a result, power generation was exceptionally low during the quarter.
The focused growth projects over the recent years have been highly successful and have contributed to our profits and returns well. During the second quarter we introduced two further focused investments: the Kaukas pulp mill efficiency and competitiveness improvement in Lappeenranta and the UPM Raflatac specialty labels expansion in Tampere, both of which are in Finland.
When it comes to longer-term growth, the discussions continue with the Government of Uruguay concerning infrastructure development and other local prerequisites for a potential pulp mill investment.
2017 has started well for us. Five out of our six businesses improved their performance during the first half of the year. Our businesses are performing well, and our cash flow and balance sheet enable us to distribute attractive dividend and simultaneously invest in profitable growth. We look confidently into the future and our opportunities for creating value from bioeconomy.
Outlook for 2017
UPM’s profitability improved significantly in 2016 and is expected to continue on a good level in 2017. Demand growth is expected to continue for most of UPM’s businesses, while demand decline is expected to continue for UPM Paper ENA. The focused growth projects continue to contribute gradually to UPM’s performance.
Following a deflationary environment in recent years, 2017 is expected to show modest input cost inflation. UPM will continue measures to reduce fixed and variable costs to mitigate this.
