UPM, a leading global company in the forest-based bioindustry, has revised its outlook for 2023, announcing a decrease in its comparable earnings before interest and taxes (EBIT) for the first half of the year compared to the same period in 2022. The company also anticipates a decrease in full-year 2023 comparable EBIT compared to the previous year.
The adjustment comes as UPM faces ongoing challenges in its various product value chains, primarily due to destocking issues, which have hindered delivery volumes across most of its businesses. The recovery of volumes has been slower than initially anticipated, leading to a dampened financial performance outlook. Moreover, chemical pulp prices have declined more rapidly than expected, reaching estimated bottom-of-the-cycle levels. Adding to these factors, UPM has scheduled high maintenance activity during the second quarter of 2023.
However, UPM remains optimistic about the potential for improvement throughout the year. The company expects a gradual recovery as the destocking in product value chains is phased out and delivery volumes benefit from the ramp-up of the UPM Paso de los Toros pulp mill and the OL3 nuclear power plant unit. These developments are projected to positively impact UPM's delivery volumes in 2023.
To mitigate the short-term lack of volumes, UPM will continue to prioritize margin management. The company has observed a decrease in many variable cost items, as expected, although the benefits of lower pulp prices on UPM's two paper businesses are subject to a normal delay.
UPM's previous outlook for 2023 projected another year of robust financial performance, building on its record earnings in 2022. The company had anticipated an increase in comparable EBIT for the first half of 2023 compared to the same period in 2022. However, the current market conditions and unforeseen challenges have necessitated the revision of these expectations.
The revised outlook underscores the uncertainties UPM faces in 2023, influenced by factors such as the European, Chinese, and global economies, Russia's war in Ukraine, lingering effects of the pandemic, energy prices, related regulations in Europe, and the ramp-up of the OL3 power plant unit.
