UPM-Kymmene Corporation, a global leader in the forest-based bioindustry, reported a decrease in earnings for the first quarter of 2024, with sales falling 5% to Euro 2,640 million compared to Euro 2,787 million in Q1 2023. The company's comparable earnings before interest and taxes (EBIT) also saw a decline, dropping 6% to Euro 333 million, representing 12.6% of sales.
Despite the earnings slip, UPM highlighted its robust operating cash flow of Euro 335 million, though down from Euro 714 million in the previous year, largely due to a seasonal increase in working capital. The company’s net debt increased to Euro 2,312 million from Euro 2,167 million, with the net debt to EBITDA ratio rising to 1.46.
The quarter was notably affected by political strikes in Finland, leading to logistical disruptions and halted production at several paper and pulp mills. "We were not a party to this political dispute but were affected by the resulting logistical blockade," said Massimo Reynaudo, UPM's president and CEO. The impact of the strikes, while modest, is expected to be reflected in both Q1 and Q2 results.
In UPM Plywood, the end of market destocking led to improved deliveries of spruce plywood, although the business continued to align production closely with market demand, implementing temporary layoffs to adjust. Reynaudo commented, "UPM Plywood is adjusting well to the shifting market conditions, showing some recovery in delivery volumes."
Key contributors to the quarter's results included the UPM Paso de los Toros pulp mill, which reached positive EBIT and operated at 83% of capacity, and the successful sale of the Steyrermühl site in Austria. The company also received recognition for its sustainability efforts, earning a double ‘A’ score from the CDP for transparency on climate change and forests.
Looking ahead to the remainder of 2024, UPM expects a stronger performance, particularly in the second half of the year. The company anticipates full-year comparable EBIT to increase from 2023, supported by higher delivery volumes, continued ramp-up and optimisation of the UPM Paso de los Toros pulp mill, and lower fixed costs. "Demand for many UPM products is expected to continue to improve gradually as the destocking seen in 2023 is over," Reynaudo added. However, he noted that the first half of 2024 might see lower EBIT compared to the second half of 2023, due to the timing of energy-related refunds in Q4 2023 and unusually high maintenance activity planned for Q2 2024.
