SHIFTING GEAR IN UPM TRANSFORMATION...85% of pulp demand is in growing end-use segments Bleached...
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Tapio Korpeinen CFO November 2013 SHIFTING GEAR IN UPM TRANSFORMATION
Transcript of SHIFTING GEAR IN UPM TRANSFORMATION...85% of pulp demand is in growing end-use segments Bleached...
Tapio Korpeinen
CFO
November 2013
SHIFTING GEAR IN UPM
TRANSFORMATION
| © UPM
From three European paper divisions
to a portfolio of six Biofore businesses
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| © UPM
New business structure
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UPM Energy
UPM Biorefining
UU UPM Raflatac
UU
UU
UU
UPM Paper ENA
UPM Plywood
UPM Paper Asia
• Pulp (3.3 million tonnes p.a.), incl. plantation operations • Biofuels • Timber
• Self-adhesive label materials for product and information
labeling
• Fine papers in China
• Label papers
• Total capacity 1.5 million tonnes p.a.
• Magazine papers in Europe and NA • Newsprint and fine papers in Europe • Total capacity 10.3 million tonnes p.a.
• Plywood and veneer products (1 million m3 p.a.)
• Power generation (1,721MW), incl. UPM’s hydropower plants
and shareholdings in energy companies
• Physical and derivatives trading
Other operations: Forests (over 900,000 hectares of forests) and wood sourcing,
New Business Development and Group services
| © UPM
New business structure
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Sales
EUR 10,123m
EBITDA
EUR 1,170m
Capital employed
EUR 11,339m
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia UPM
Paper ENA
UPM
Plywood Other
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
Other
UPM Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM Plywood
Preliminary figures Q4/2012-Q3/2013
| © UPM
Profit
improvement
programme
EUR 200m
Shifting gear in UPM transformation with
the new business structure
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UPM
Biorefining
UPM
Paper
Asia
UPM
Raflatac
UPM
Energy
UPM
Paper
ENA
UPM
Plywood
EBITDA target for
growth initiatives
EUR 200m
Biofuels:
Lappeenranta
biorefinery
Pulp: 10%
capacity increase
Woodfree speciality
papers in China:
Changshu PM3
Self-adhesive labels:
growth in emerging
markets in higher value
added products
Business portfolio
development and
value creation
BIOFIBRILS
BIOCHEMICALS
BIOCOMPOSITES
BIOFUELS
New businesses
| © UPM
Profit improvement programme
through simplified business structure
0
50
100
150
200
250
Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115
6
EURm
Full impact of the programme is expected by the end of
2014, as compared with the Q2/13 results
25%
achieved
in Q3/13
EUR 200m of
annualised
fixed and
variable cost
savings
| © UPM
Growth initiatives
for the next three years
• UPM targets additional EBITDA contribution of EUR 200m from
its growth initiatives when they are in full operation
– UPM Biorefining: biofuels and debottlenecking actions in all of the existing
pulp mills
– UPM Paper Asia: woodfree speciality papers in China
– UPM Raflatac: growth in emerging markets in higher value added products
• Total investment requirement in the projects is EUR 680m
– Total remaining investment EUR 584m in the coming three years
• UPM’s total capex estimate for 2013 is EUR 400m
– Low investment needs in existing assets allow growth initiatives with
modest total annual capex
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| © UPM
UPM Biorefining
UPM creates new business in
wood-based renewable diesel
• UPM invests in wood-based renewable diesel production
− Total investment EUR 150m
− Production capacity 100,000 tonnes/a
− start-up in mid-2014
• Technology is based on UPM’s innovation and
long-term development work
• Raw material is sustainably produced crude tall oil
– Residue from pulp production
– Outside food value chain, no indirect land use change
• Main product is unique renewable diesel
– No blend wall issues - compatible with fossil diesel EN590 quality
– 80% reduction in greenhouse gas emissions
– High energy content
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| © UPM
UPM Biorefining
UPM creates new business in
wood-based renewable diesel
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| © UPM
Kymi - major investment 2008 - capacity 570,000 t. of birch and softwood pulp
Pietarsaari - major investment 2004 - capacity 790,000 t. of birch and softwood pulp
Kaukas - modernisation in 1996 - capacity 740,000 t. of birch and softwood pulp
Fray Bentos - started 2007 - capacity 1,200,000 t. of Eucalyptus pulp
UPM Biorefining
UPM plans to expand production in its existing
pulp mills by 10%
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| © UPM
UPM Biorefining
85% of pulp demand is in growing end-use
segments
Bleached market pulp demand by end-use and region
*Source: Hawkins Wright. End use markets
for bleached kraft pulp, September 2013
WE NA China ROW Total
P&W 11% 4% 11% 8% 34%
Tissue 10% 6% 6% 10% 32%
Packaging 1% 0% 4% 2% 8%
Speciality 6% 1% 4% 4% 16%
Fluff 2% 2% 1% 4% 10%
30% 14% 27% 28% 100%
= declining market segment (15%)
= growing market segment (85%)
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| © UPMU
UPM Paper Asia
UPM expands in China and the global
label papers market
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PM2
Start-up
UPM 100%
ownership
Decision on
PM1 PM1
start-up
R&D Center
established
Decision on
PM3
UPM and APRIL
1998 2000 2002 2004 2006 2008 2009 2010 2012 2014 2016
APAC sales
volume,
tonnes
Changshu PM3:
• 360,000 tonnes of woodfree speciality papers
• start-up in H1 2015
• Total investment approx. EUR 390m
| © UPM
UPM Raflatac
Consistent growth in label materials
0
250
500
750
1 000
1 250
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
UPM Raflatac sales EURm
13
| © UPM
0
50
100
150
200
250
300
350
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Emerging markets, all products
UPM Raflatac
Growth in higher value added labelstock
products and growth markets
UPM Raflatac sales (indexed)
2003 = 100
Mature markets,
high added value
products
Mature markets, all products
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FINANCIALS
| © UPM
Q3/2013 in brief
EUR m Q3/2013 Q3/2012 9M/2013 9M/2012 2012
Sales 2,472 2,595 7,466 7,835 10,492
EBITDA 311 313 853 995 1,312
% of sales 12.6 12.1 11.4 12.7 12.5
Operating profit (* 194 126 476 410 556
Profit before tax (* 173 105 422 348 471
EPS, EUR (* 0.26 0.16 0.64 0.54 0.74
Operating cash flow 286 319 473 679 1,040
16 *) excluding special items
• Q3/13 EBITDA was EUR 311m (Q3/12: 313m)
• Growth businesses continued to perform well
• Paper EBITDA recovered to the same level as last year – cost
reductions offset the decrease in prices and volumes
• Strong cash flow – net debt decreased
| © UPM
5,3
8,3
5,4
3,5
8,2
6,86,4
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 9kk/13
-7,5
-5,0
-2,5
0,0
2,5
5,0
7,5
10,0
12,5
2007 2008 2009 2010 2011 2012 2013E
Operating profit excluding special items
Profitability over two economic slowdowns
Europe continues to underperform
the other major economic zones
Real GDP y-o-y growth %
Sources: Global Insight
% of sales
Euro zone
US
BRIC
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Real GDP y-o-y growth %
| © UPM
Profitability challenge in UPM Paper ENA
– improvement programmes in all businesses
-10
0
10
20
30
40
50
-100
0
100
200
300
400
500
UPMBiorefining
UPMEnergy
UPMRaflatac
UPMPaper Asia
UPMPaperENA
UPMPlywood
Other
EUR million EBITDA in Q1-Q3 2013 *)
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EBITDA margin, %
23%
43%
9%
15% 4%
9%
*) Preliminary figures
| © UPM
0
200
400
600
800
1 000
1 200
1 400
2007 2008 2009 2010 2011 2012 LTM Q3/13
Consistent cash flow
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Cash flow EURm
Operating cash flow
Cash flow
after investing
activities
| © UPM
0
200
400
600
800
1 000
1 200
2007 2008 2009 2010 2011 2012 2013e
Low investment needs in existing assets allow
growth initiatives with modest total annual capex
20
EUR million
Operational investments
350
Capital expenditure
Strategic investments
Depreciation
Uruguay
acquisition
Estimate
Myllykoski
acquisition
340 400
| © UPM
0,20
0,30
0,40
0,50
0,60
0,70
0,80
0,90
0
200
400
600
800
1 000
1 200
1 400
2008 2009 2010 2011 2012
Cash flow-based dividend
Cash flow,
EUR million
EUR per
share
0.40
0.45
0.55
Actual / proposed dividend
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Dividend policy
• at least 1/3 of net cash flow from
operating activities less
operational capital expenditure
• net cash flow calculated as an
average over three years
Dividend for 2012
• EUR 0.60 (0.60) per share
Operational capex
Minimum dividend by the dividend policy
Cash flow after operational capex
0.60 0.60
| © UPM
Solid balance sheet
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2 500
3 000
3 500
4 000
4 500
5 000
5 500
6 000
2008
2009
2010
2011
2012
2013
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
Net debt, EUR million Net debt / EBITDA (trailing 12 months)
Net debt
Net debt / EBITDA
2.8
2 500
3 000
3 500
4 000
4 500
5 000
5 500
6 000
2008
2009
2010
2011
2012
2013
20
30
40
50
60
70
80
90
Net debt, EUR million Gearing %
Net debt
Gearing
45
Liquidity was EUR 1.7bn at the end of Q3 2013
Repayments total EUR 0.8bn in 2013-14
| © UPM
Profit
improvement
programme
EUR 200m
Shifting gear in UPM transformation with
the new business structure
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UPM
Biorefining
UPM
Paper
Asia
UPM
Raflatac
UPM
Energy
UPM
Paper
ENA
UPM
Plywood
EBITDA target for
growth initiatives
EUR 200m
Biofuels:
Lappeenranta
biorefinery
Pulp: 10%
capacity increase
Woodfree speciality
papers in China:
Changshu PM3
Self-adhesive labels:
growth in emerging
markets in higher value
added products
Business portfolio
development and
value creation
BIOFIBRILS
BIOCHEMICALS
BIOCOMPOSITES
BIOFUELS
New businesses
