UPM delivers a record quarter in an exceptionally volatile global environment
Q3 2021 highlights
- Sales increased by 24% to EUR 2,523 million (2,028 million in Q3 2020)
- Comparable EBIT increased by 98% to EUR 424 million, 16.8% of sales (215 million, 10.6%)
- Operating cash flow was EUR 318 million (365 million)
- Demand for UPM’s products was good, and overall, price increases more than offset the rapid rise in input costs
- UPM completed the sale of the UPM Shotton newsprint mill in the UK
- The global sustainability ratings provider EcoVadis recognised UPM on the highest possible Platinum level for its responsible performance in 2021
- UPM was recognised as one of the world’s 37 most sustainable companies by the UN Global Compact
Q1–Q3 2021 highlights
- Sales increased by 12% to EUR 7,141 million (6,392 million in Q1–Q3 2020)
- Comparable EBIT increased by 45% to EUR 1,010 million (697 million), and was 14.1% (10.9%) of sales
- Operating cash flow was EUR 844 million (659 million)
- UPM's transformative growth projects made good progress
- Net debt increased to EUR 667 million (89 million) and net debt to EBITDA ratio was 0.38 (0.06)
- Cash funds and unused committed credit facilities totalled EUR 2.5 billion at the end of September
- UPM started the basic engineering phase of a next-generation biofuels refinery in January
- UPM joined The Climate Pledge in February, committed to reach the targets of the Paris Agreement 10 years in advance
Jussi Pesonen, President and CEO, comments on the Q3 results:
“The third quarter of the year was the best-ever quarter for UPM. At the same time, we have been able to make good progress with our transformative investments. These achievements are remarkable in an exceptionally volatile and uncertain global business environment, and I want to thank all UPMers for the resilience and determination they have shown.
The demand for our products was good, particularly in Europe and North America, and sales prices increased in all our businesses. However, variable costs rose rapidly across the board as well. Most notably the energy markets have changed dramatically in a short period of time. Our operational efficiency was excellent despite the challenges in logistics and global supply chains.
Q3 sales increased by 24% to EUR 2,523 million. Comparable EBIT was up by 98% rising to EUR 424 million from the lockdown affected Q3 of last year. Comparable EBIT margin reached 16.8%. Operating cash flow was EUR 318 million and our financial position remains very strong. Net debt at the end of September was EUR 667 million, 0.38 times EBITDA, and our cash funds and unused committed credit facilities totalled EUR 2.5 billion.
UPM Biorefining reached record quarterly earnings thanks to significantly higher pulp and timber sales prices and excellent operational efficiency. The pulp market continued to be strong in Europe but softened in Asia. Demand for advanced renewable diesel and naphtha was also strong, and our Lappeenranta biorefinery restarted production in early August after the fire related repairs.
UPM Raflatac continued to be one of our star performers. Demand growth was consistently strong across most markets and end-uses. Input costs rose rapidly during the quarter but were mitigated by successful margin management.
The market situation for UPM Specialty Papers was twofold. On the one hand, demand for release, label and packaging papers remained strong in all markets and sales prices increased significantly. On the other hand, fine paper demand in Asia slowed down and prices decreased. High input costs and the exceptional energy market situation in China affected the results.
Despite good market demand in Europe and the implementation of price increases, UPM Communication Papers was loss-making in the quarter. On top of the anticipated cost increases in pulp, recycled fibre and logistics, the emerging energy crisis in Europe resulted in unforeseen cost increases despite hedging. The sale of UPM Shotton newsprint mill was concluded at the end of the quarter.
UPM Energy delivered excellent earnings. The business benefitted from significantly higher electricity sales prices and it successfully implemented optimisation and value creation measures for the volatile markets.
UPM Plywood also achieved record quarterly earnings. Market demand for both spruce and birch plywood continues to be strong and price increases have been successful. The business also made good progress in operational efficiency, reaching higher production volume than a year ago.
In Uruguay, we have now reached peak activity with more than 6,000 workers on our construction sites. The investment project is progressing intensively in all main areas. In Leuna, Germany, our biochemicals investment is making progress both at the construction site and in business preparation. The pandemic and global logistics bottlenecks pose challenges to large projects, and we continue implementing mitigating actions to ensure timely progress.
The commercialisation of the next generation biochemicals is taking significant steps forward. We are especially excited about our cooperation with Coca-Cola Company. UPM’s bioMEG from the Leuna biorefinery will enable wood-based, recyclable PET bottles. In addition, we launched UPM BioMotion™ renewable functional fillers to significantly reduce CO₂ footprint and weight of rubber and plastics applications in a variety of end-uses.
On the eve of UN climate change conference COP26, we underline the importance of renewable solutions. Undisputedly the most effective way to mitigate climate change is reducing the use of fossil-based raw materials and energy radically. UPM offers alternatives to fossil-based materials and creates a future beyond fossils, enabling our customers and consumers to make sustainable choices. Our climate action is based on significant emissions reductions, managing forests sustainably and innovating climate-positive products. These actions support the UN Business Ambition for 1.5 degrees to which we are committed.”
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