HELSINKI, Oct. 29, 2024 /PRNewswire/ -- UPM-Kymmene Corporation Stock Exchange Release (Interim Report) 29 October 2024 at 09:40 EET

UPM Interim Report Q3 2024:

Comparable EBIT +32% from last year in a challenging market

Q3 2024 highlights

• Sales decreased by 2% to EUR 2,521 million (2,584 million in Q3 2023)
• Comparable EBIT increased by 32% to EUR 291 million, 11.5% of sales (220 million, 8.5%)
• Operating cash flow was EUR 242 million (641 million)
• Demand recovery for UPM's products slowed down
• UPM Paso de los Toros pulp mill was in full production
• UPM acquired Grafityp in Belgium to accelerate growth in UPM Raflatac
• UPM closed the Hürth newsprint mill and decided on the shutdown of one fine paper machine at the Nordland mill, Germany
• EcoVadis awarded UPM a platinum score based on the company's sustainability performance

Q1–Q3 2024 highlights

• Sales decreased by 3% to EUR 7,707 million (7,929 million in Q1–Q3 2023)
• Comparable EBIT increased by 17% to EUR 806 million (689 million), and was 10.5% (8.7%) of sales
• Operating cash flow was EUR 782 million (1,814 million)
• Net debt increased to EUR 2,804 million (2,363 million) and the net debt to EBITDA ratio was 1.59 (1.27)
• Cash funds and unused committed credit facilities totalled EUR 3.7 billion at the end of Q3 2024
• Sale of the Steyrermühl site, Austria in January
• CDP recognised UPM with double 'A' score for transparency on climate change and forests

Key figures

UPM presents certain measures of performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of alternative performance measures are presented in » UPM Annual Report 2023

Massimo Reynaudo, President and CEO, comments on the results:

"Our Q3 results improved both year-on-year and quarter-on-quarter, with a significant contribution from the fully ramped-up UPM Paso de los Toros pulp mill. The earnings improvement, albeit good, was lower than earlier expected as the market demand of our products slowed down after the encouraging start of the year. We took measures in several of our businesses to safeguard profitability and we continue to take decisive actions to ensure the competitiveness of our businesses and support our growth ambitions.

Our Q3 sales were EUR 2,521 million and our comparable EBIT increased by 32% to EUR 291 million. Our net debt was EUR 2,804 million, 1.59 times EBITDA. Cash funds and unused committed credit facilities totalled at EUR 3.7 billion at the end of the quarter, following the successful issuance of our fourth Green Bond, for EUR 600 million, in August.

At our Capital Markets Day in September, we provided an update on the next phase of our strategy. Under the title "From transformation to growth" we presented a business portfolio which is based on sustainable and renewable feedstocks and fossil-free energy and is well positioned for robust growth in renewable fibres, advanced materials and in decarbonisation solutions, with graphic papers continuing to generate strong cash flows.

Renewable fibres

Pulp market demand slowed down during the summer and prices decreased consequently. This development was more pronounced for hardwood pulp in China.

UPM Fibres increased its comparable EBIT. The highly competitive business platform in Uruguay performed well. Q3 was the first quarter of full production at both pulp mills in Uruguay, paving the way for further optimisation to reach the targeted performance levels.

In Finland, the wood cost has reached unsustainable levels. To safeguard margins, we limited pulp production at two of our mills in September and early October and have since started negotiations for efficiency measures in UPM Pulp, UPM Forest and UPM Timber in Finland.

Advanced materials

Deliveries in UPM Raflatac and UPM Specialty Papers were lower than originally expected, as demand slowed down after the strong start of the year. UPM Specialty Papers was also impacted by peak fibre costs and weakness in the Chinese fine paper market. As a result, comparable EBIT in the two businesses decreased. UPM Plywood performed well considering the slow construction markets.

We see attractive growth prospects in advanced materials in the medium to long term. We are taking the necessary competitiveness measures to be in the best position to capture these opportunities.

Decarbonisation solutions

In the decarbonisation solutions, UPM Energy saw very low electricity prices during the summer, given the high volume of renewable power generation. UPM Biofuels' feedstock costs started decreasing, and recent political decisions support a gradual market recovery in the future.

Work at the UPM Biochemicals site in Leuna, Germany, continued at full speed and we are very much looking forward to starting the refinery over the coming months.

Graphic papers

UPM Communication Papers improved both volumes and earnings compared to the previous quarter. To maintain good performance and cash generation in a mature and declining market, the UPM Hürth newsprint mill in Germany was permanently closed at the end of August. A fine paper machine at Nordland Papier, also in Germany, will be closed by the end of 2024.

During the quarter, EcoVadis awarded us a Platinum rating based on our sustainability performance in the categories of environment, labour and human rights, ethics, and sustainable sourcing. This is another compelling demonstration of our commitment to creating value for our customers using sustainable, renewable resources, reducing our environmental footprint, and increasing our positive societal impact. For UPM, sustainability is a core strategic value.

UPM's strong and balanced business portfolio in renewable fibres, advanced materials and decarbonisation solutions provides us with a range of attractive growth opportunities in the coming years. In the current challenging business environment with a slow market recovery, however, our top priority is to further improve profitability and competitiveness. With these timely and targeted actions, we are setting ourselves up to capture the recovery and future growth in our product markets."

Outlook for 2024

UPM's comparable EBIT in Q4 2024 is expected to be on similar level or increase from Q4 2023 (EUR 323 million). UPM's comparable EBIT in full-year 2024 is expected to be on similar level or increase from 2023.

Invitation to UPM's webcast on Q3 2024 interim report

A webcast and a conference call for analysts and investors will start at 13:15 EET. The interim report will be presented in English by President and CEO Massimo Reynaudo and CFO Tapio Korpeinen. Participants can follow the webcast online via this link.

Participants wishing to ask questions after the presentation must register for the conference call. To participate in the conference call, please register here. After registering, you will be provided with telephone numbers, a user ID and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to join the queue.

The webcast will be available at www.upm.com for 12 months after the call.

*

It should be noted that certain statements herein, which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by "believes", "expects", "anticipates", "foresees", or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein including the availability and cost of production inputs, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. The main earnings sensitivities and the group's cost structure are presented on pages 178–179 of the Annual Report 2023. Risks and opportunities are discussed on pages 34–35, and risks and risk management are presented on pages 133–137.

UPM, Media Relations

Mon-Fri 9:00–16:00 EET

tel. +358 40 588 3284

media@upm.com

UPM

We deliver renewable and responsible solutions and innovate for a future beyond fossils across six business areas: UPM Fibres, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers and UPM Plywood. As the industry leader in responsibility, we are committed to the UN Business Ambition for 1.5°C and the science-based targets to mitigate climate change. We employ 16,600 people worldwide and our annual sales are approximately EUR 10.5 billion. Our shares are listed on Nasdaq Helsinki Ltd. UPM Biofore – Beyond fossils. www.upm.com

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