UPM Half-Year Financial Report 2020: Q2 impacted by lockdowns, transformative growth projects on track

UPM Half-Year Financial Report 2020:
Q2 impacted by lockdowns, transformative growth projects on track

Q2 2020 highlights

  • Sales decreased by 20% to EUR 2,077 million (2,605 million in Q2 2019) due to lower deliveries of graphic papers and lower pulp and paper sales prices
  • Comparable EBIT decreased by 41% to EUR 203 million (345 million), and was 9.8% (13.2%) of sales
  • The COVID-19 lockdowns significantly decreased demand for graphic papers
  • Demand for labelling materials and specialty papers increased during the lockdowns
  • Operating cash flow was EUR 156 million (436 million)
  • Closures of UPM Chapelle paper mill and UPM Jyväskylä plywood mill

H1 2020 highlights

  • Sales decreased by 18% to EUR 4,364 million (5,298 million in H1 2019) due to lower deliveries of graphic papers and lower pulp and paper sales prices
  • Comparable EBIT decreased by 33% to EUR 482 million (719 million), and was 11.0% (13.6%) of sales
  • UPM’s transformative pulp project in Uruguay and biochemicals project in Germany are well on track with the planned start-up timeline
  • Operating cash flow was EUR 293 million (756 million)
  • Net debt decreased to EUR 301 million (366 million)
  • Cash funds and unused committed credit facilities totalled EUR 2.0 billion at the end of June

Jussi Pesonen, President and CEO, comments on the Q2 2020 results:

“In the second quarter of 2020 people and businesses around the world felt the impact of the COVID-19 pandemic and the related lockdowns. For UPM the impact was divided. Demand for graphic papers seriously suffered as a result of lockdowns, whereas labels and specialty papers saw strong demand and delivered excellent results. Our financial standing remains strong, and our strategic growth projects continue as planned.

We have taken proactive and extensive precautions to ensure the safety of our employees and continuity of our operations. Consequently, few UPM employees have been infected and we have been able to serve our customers without interruption. This is a great achievement and has enabled satisfactory results in highly exceptional circumstances.

Our sales decreased by 20% to EUR 2,077 million and comparable EBIT by 41% to EUR 203 million. Operating cash flow was EUR 156 million. Net debt decreased from last year to EUR 301 million and liquidity totalling EUR 2.0 billion.

The lockdown of businesses, offices and schools caused a drastic decline in printed advertising and use of office papers. In Europe, Q2 demand for graphic papers decreased by 32% from last year. We achieved significant savings in fixed costs, but this could not offset the headwind from the markets. UPM Communication Papers’ quarterly EBIT was negative for the first time in five years.

At the same time lockdowns had a positive impact on some of UPM’s businesses. UPM Raflatac and UPM Specialty Papers benefited from strong demand for daily consumer goods and growth in e-commerce, increasing the need for labelling and packaging solutions. In Europe, Q2 demand for self-adhesive labels grew by 10% compared to last year. The favourable markets combined with long-term efforts to improve margins resulted in excellent profits in both business areas.

In UPM Biorefining, pulp deliveries were strong in Q2. Due to the pandemic, maintenance shutdowns were postponed until Q4 and our pulp mills were running at full capacity. However, prices remain low and the results leave room for improvement.
UPM Energy achieved good results despite lower prices in highly volatile markets. UPM Plywood had a relatively solid quarter, but the market for birch plywood remains weak.

In the coming quarters, we will focus on two main topics. First, we will ensure good performance in all our businesses through these exceptional times. Second, we will implement our transformative growth projects in Uruguay and Germany with determination.

During the current uncertainty, we have adjusted our operations using measures such as temporary lay-offs and shift arrangements. In addition, we have taken action and will continue to take action to ensure the profitability and competitiveness of our operations both during the current downturn and in the long term. Last week we announced the closure of UPM Chapelle mill, which will reduce our newsprint capacity by 240,000
tonnes. This week we decided to permanently close the UPM Jyväskylä plywood mill.

I am happy to say that our growth projects are well on track. Unlike many Latin American countries, Uruguay has taken stringent COVID-19 measures and managed to keep the overall level of infections very low throughout the country. This, combined with UPM’s own safety processes, has kept our sites in the country free of COVID-19 cases. In Paso de los Toros, the mill foundation works have started and housing is getting ready to accommodate the increasing number of workers entering the site during the autumn. In the biochemicals project in Germany, the planning has proceeded well, and we are starting work on site at Leuna.

UPM’s value creation today and in the future is based on offering sustainable products and solutions to consumers and businesses. We are confident with our Biofore strategy and committed to growing businesses for a future beyond fossils.”

Outlook for 2020

The COVID-19 pandemic, the related containment measures and the economic downturn continue to cause high uncertainty for H2 2020.

The COVID-19-lockdowns had a significant negative impact on graphic paper demand. The lockdowns also supported the strong demand for self-adhesive labelling materials and specialty papers in H1 2020. There are early signs of some normalisation of these temporary demand impacts, both positive and negative. However, the development is uncertain and likely to be gradual, depending on the easing of lockdowns and changes in consumer reactions.

Demand for most UPM products is influenced by overall economic activity and hence, also depends on the shape and rate of the economic recovery.

Paper prices are expected to decrease moderately in H2 2020 compared with H1 2020. Pulp sales prices are starting H2 2020 at a low level.

There will be more maintenance activity in H2 2020 than in H1 2020, particularly as the two pulp mill maintenance shutdowns were rescheduled from Q2 2020 to Q4 2020.

UPM will continue to implement measures to decrease fixed and variable costs.

UPM’s comparable EBIT is expected to be significantly lower in 2020 than in 2019.

Invitation to UPM’s webcast and press conference on half-year financial report 2020

A webcast and a conference call for analysts and investors in English language begins at 13:15 EET. UPM’s financial results will be presented by the President and CEO Jussi Pesonen and CFO Tapio Korpeinen. All participants can view the webcast online at or through this link, but participants who wish to ask questions must attend the conference call by dialling a number in the list below:

Conference call title: UPM Interim Report for January – June 2020
International telephone numbers:

Australia Toll: +61 284058549
Austria Toll: +43 19287907
Belgium Toll: +32 24035814
Denmark Toll: +45 35445577
Finland Toll: +358 981710310
France Toll: +33 170750711
Germany Toll: +49 6913803430
Hong Kong Toll: +852 30600225
India Toll: +91 2271279610
Ireland Toll: +353 14311252
Italy Toll: +39 0236013821
Japan Toll: +81 344556492
Netherlands Toll: +31 207095189
Norway Toll: +47 23500243
Singapore Toll: +65 64298349
Spain Toll: +34 935472900
Sweden Toll: +46 856642651
Switzerland Toll: +41 225809034
United Kingdom Toll: +44 3333000804
United States Toll: +1 6319131422

PIN code: 86281598#

We recommend that participants dial in 5-10 minutes prior to ensure a timely start of the webcast. The webcast will be available at for 12 months after the call.

Later in the afternoon, at 14:30 EET, CEO Jussi Pesonen will present the results in a press conference held in Finnish language at the UPM Group Head Office (The Biofore House) in Helsinki, Alvar Aallon katu 1. The press conference can also be attended online by registering through this link. Only the registered will receive the link to the press conference. Questions can be asked via live chat.

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