UPM-Kymmene Corporation Interim Report 28 October 2010 at 09:35
UPM Interim Report 1 January-30 September 2010
Q3/2010: Earnings per share were EUR 0.34 (0.08), excluding special items
EUR 0.28 (0.14). EBITDA was EUR 384 million, 16.6% of sales (334 million,
17.5% of sales). Best EBITDA in three years. Sales prices and delivery
volumes increased in all businesses - sales grew by 21%.
Q1-Q3/2010: Earnings per share were EUR 0.80 (-0.24), excluding special items
EUR 0.72 (-0.10). EBITDA was EUR 1,025 million, 15.6% of sales (EUR 700
million, 12.5% of sales). Demand and delivery volumes increased in
all businesses - sales grew by 17%. Solid cash flow - net debt now lower
than before the Uruguay acquisition in Q4 2009.
Key figures
Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2010 2009 2009
Sales, EURm 2,312 1,913 6,567 5,611 7,719
EBITDA, EURm 1) 384 334 1,025 700 1,062
% of sales 16.6 17.5 15.6 12.5 13.8
Operating profit (loss), EURm 238 96 548 9 135
excluding special items, EURm 204 131 519 84 270
% of sales 8.8 6.8 7.9 1.5 3.5
Profit (loss) before tax, EURm 199 64 462 -124 187
excluding special items, EURm 165 99 433 -49 107
Net profit (loss) for the 178 40 417 -126 169
period, EURm
Earnings per share, EUR 0.34 0.08 0.80 -0.24 0.33
excluding special items, EUR 0.28 0.14 0.72 -0.10 0.11
Diluted earnings per share, EUR 0.34 0.08 0.80 -0.24 0.33
Return on equity, % 10.3 2.8 8.2 neg. 2.8
excluding special items, % 8.6 5.0 7.4 neg. 1.0
Return on capital employed, % 8.0 3.5 6.5 0.0 3.2
excluding special items, % 6.8 4.9 6.1 0.9 2.5
Operating cash flow per 0.63 0.59 1.23 1.71 2.42
share, EUR
Shareholders' equity per 13.28 11.13 13.28 11.13 12.67
share at end of period, EUR
Gearing ratio at end of period, % 51 64 51 64 56
Net interest-bearing 3,553 3,688 3,553 3,688 3,730
liabilities at end of period, EURm
Capital employed at end of 11,377 10,172 11,377 10,172 11,066
period, EURm
Capital expenditure, EURm 68 39 153 172 913
Capital expenditure excluding 66 38 148 171 229
acquisitions and shares, EURm
Personnel at end of period 22,293 23,180 22,293 23,180 23,213
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets, excluding the
share of results of associated companies and joint ventures, and special items.
Results
Q3 of 2010 compared with Q3 of 2009
Sales for the third quarter of 2010 were EUR 2,312 million, 21% higher than the
EUR 1,913 million in the third quarter of 2009. Sales increased due to higher
delivery volumes and sales prices across all of UPM's business areas.
EBITDA was EUR 384 million, 16.6% of sales (334 million, 17.5% of sales).
EBITDA increased from the same period last year. Higher sales prices and
delivery volumes in all of UPM's business areas, and the inclusion of the
acquired Uruguayan operation were the main contributors to the improvement.
Contribution of higher sales prices in euro terms to EBITDA improvement was
about EUR 108 million. Sales prices increased in all business areas, both
compared with the same period last year and with the second quarter of 2010.
The average paper price in euros increased by approximately 4% from the same
period last year, or by about 3% from the second quarter of 2010.
Variable costs increased clearly from last year. The biggest cost increase was
seen in fibre, with purchased pulp, recovered paper and round wood all showing
cost increases.
Operating profit was EUR 238 million, 10.3% of sales (96 million, 5.0% of
sales). The operating profit excluding special items was EUR 204 million, 8.8%
of sales (131 million, 6.8% of sales).
Operating profit includes net income of EUR 34 million as special items. This
includes a EUR 33 million capital gain from selling a conservation easement on
187,876 acres (76,000 hectares) of UPM-owned forest land in northern Minnesota.
The increase in the fair value of biological assets net of wood harvested was
EUR 14 million compared to a decrease of EUR 13 million a year before.
The share of results of associated companies and joint ventures was EUR 2
million negative (21 million negative). As of December 2009, Metsä-Botnia is no
longer an associated company of UPM.
Profit before tax was EUR 199 million (64 million) and excluding special items
EUR 165 million (99 million). Interest and other finance costs, net, were EUR
28 million (28 million). Exchange rate and fair value gains and losses resulted
in a loss of EUR 11 million (loss of EUR 3 million).
Income taxes were EUR 21 million (24 million). The impact on taxes from special
items was EUR 5 million negative (3 million positive).
Profit for the third quarter was EUR 178 million (40 million) and earnings per
share were EUR 0.34 (0.08). Earnings per share excluding special items were EUR
0.28 (0.14).
January-September of 2010 compared with January-September 2009
Sales for January-September were EUR 6,567 million, 17% higher than the EUR
5,611 million in the same period in 2009. Sales increased due to higher
delivery volumes across all of UPM's business areas.
EBITDA was EUR 1,025 million, 15.6% of sales (700 million, 12.5% of sales).
EBITDA improved clearly from last year. Higher delivery volumes in all of UPM's
business areas and the inclusion of the Uruguayan operation acquired in
December 2009 were the main contributors to the improvement.
Variable costs were higher than last year, even though wood and energy costs
were lower. Wood costs increased from the latter part of 2009, but were still
approximately EUR 65 million lower than the peak levels of the comparison
period. Energy costs decreased by about EUR 54 million. However, costs
increased for purchased pulp, recovered paper and other raw materials.
Changes in sales prices in euro terms had a negative net impact (EUR 22
million) on EBITDA. The average paper price in euros decreased by about 3% from
the same period last year. Plywood prices were at approximately the same level
as last year. Average sales prices increased for label materials and sawn
timber, as well as for external pulp and electricity sales.
Fixed costs (comparable) were approximately EUR 60 million higher than last
year mainly due to higher operating rates at production units.
Operating profit was EUR 548 million, 8.3% of sales (9 million, 0.2% of sales).
The operating profit excluding special items was EUR 519 million, 7.9% of sales
(84 million, 1.5% of sales). Operating profit includes net income of EUR 29
million as special items. This includes a EUR 33 million capital gain from
selling a conservation easement.
The increase in the fair value of biological assets net of wood harvested was
EUR 64 million compared to EUR 8 million a year before.
The share of results of associated companies and joint ventures was EUR 9
million (96 million negative). As of December 2009, Metsä-Botnia is no longer
an associated company of UPM.
Profit before tax was EUR 462 million (loss of EUR 124 million) and excluding
special items EUR 433 million (loss of EUR 49 million). Interest and other
finance costs, net, were EUR 81 million (123 million). Exchange rate and fair
value gains and losses resulted in a loss of EUR 6 million (9 million).
Income taxes were EUR 45 million (2 million). The impact on taxes from special
items was EUR 12 million positive (3 million positive).
Profit for the period was EUR 417 million (loss of EUR 126 million) and
earnings per share were EUR 0.80 (-0.24). Earnings per share excluding special
items were EUR 0.72 (-0.10). Operating cash flow per share was EUR 1.23 (1.71).
Financing
In January-September, cash flow from operating activities, before investing and
financing activities, was EUR 639 million (889 million). Working capital
increased by EUR 237 million during the period (decreased by EUR 437 million),
driven by the increase in business activity.
The gearing ratio as of 30 September 2010 was 51% (64%). Net interest-bearing
liabilities at the end of the period came to EUR 3,553 million (3,688 million).
On 30 September 2010, UPM's cash funds and unused committed credit facilities
totalled EUR 1.5 billion. In September 2010, UPM cancelled the EUR 825 million
credit facility that was to mature in 2012. Given its cash flow generation, the
company saw the current liquidity as adequate.
Personnel
In January-September, UPM had an average of 22,916 employees (23,826). At the
beginning of the year, the number of employees was 23,213 and at the end of
September it was 22,293. The reduction of 920 employees is mostly attributable
to restructuring in the Plywood and Forest and timber business areas.
Capital expenditure
During January-September, capital expenditure was EUR 153 million, 2.3% of
sales (172 million, 3.1% of sales).
The largest ongoing project is the rebuild of the debarking plant at the
Pietarsaari mill in Finland. The total investment cost is estimated to be EUR
25 million.
Negotiations with Myllykoski Group
On 28 September 2010 UPM confirmed, following an article in a Finnish business
newspaper, that it is engaged in discussions with the Finnish publication paper
producer Myllykoski Group concerning a potential transaction of Myllykoski's
operations in Finland, Germany and the United States.
The discussions continue and a number of significant issues remain unresolved.
Therefore, there can be no certainty that the discussions between UPM,
Myllykoski and its lenders will result in a transaction.
Shares
UPM shares worth EUR 6,405 million (4,382 million) in total were traded on the
NASDAQ OMX Helsinki stock exchange during January-September of 2010. The
highest quotation was EUR 12.73 in September and the lowest EUR 7.37 in
February.
The company's ADSs are traded on the US over-the-counter (OTC) market under a
Level 1 sponsored American Depositary Receipt programme.
The Annual General Meeting, held on 22 March 2010, authorised the Board of
Directors to acquire no more than 51,000,000 of the company's own shares. The
authorisation is valid for 18 months from the date of the decision.
The Board was authorised to decide on the issuance of shares and/or transfer
the company's own shares held by the company and/or issue special rights
entitling holders to shares in the company as follows: (i) The maximum number
of new shares that may be issued and the company's own shares held by the
company that may be transferred is, in total, 25,000,000 shares. This figure
also includes the number of shares that can be received on the basis of the
special rights. (ii) The new shares and special rights entitling holders to
shares in the company may be issued and the company's own shares held by the
company may be transferred to the company's shareholders in proportion to their
existing shareholdings in the company, or in a directed share issue, deviating
from the shareholder's pre-emptive subscription right. This authorisation is
valid until 22 March 2013.
To date these authorisations have not been used.
The company has four option series that would entitle the holders to subscribe
for a total of 18,000,000 shares. Share options 2005H may be subscribed for
3,000,000 shares, and share options 2007A, 2007B and 2007C may be subscribed
for a total of 15,000,000 shares.
Apart from the above, the Board of Directors has no current authorisation to
issue shares, convertible bonds or share options.
The number of shares entered in the Trade Register on 30 September 2010 was
519,970,088. Through the issuance authorisation and share options, the number
of shares may increase to a maximum of 562,970,088.
At the end of the period, the company did not hold any of its own shares.
The listing of UPM 2007A stock options on the NASDAQ OMX Helsinki stock
exchange commenced on 1 October 2010.
Litigation and other legal actions
In Finland, UPM is participating in the project for construction of a new
nuclear power plant, Olkiluoto 3, through its associated company Pohjolan Voima
Oy. Pohjolan Voima Oy is a majority shareholder of Teollisuuden Voima Oy
("TVO") with 58.28% of shares. UPM's indirect share of the capacity of the
Olkiluoto 3 is approximately 29%. The original agreed timetable for the
start-up of the power plant was summer 2009 but the construction of the unit
has been delayed. In June 2010, the AREVA-Siemens Consortium announced that the
majority of the work is expected to be completed in 2012 and, consequently,
electricity production at Olkiluoto 3 is estimated to start in 2013.
TVO has informed that the arbitration filed in December 2008 by AREVA-Siemens,
concerning the delay at Olkiluoto 3 and related costs, amounted to EUR 1.0
billion. In response, TVO filed a counterclaim in April 2009 for costs and
losses that TVO is incurring due to the delay and other defaults on the part of
the supplier. The value of TVO's counterclaim was approximately EUR 1.4
billion.
The International Court of Justice published its final decision on a litigation
against the government of Uruguay on 20 April 2010 in a dispute between the
governments of Uruguay and Argentina. In Uruguay, there are two pending
litigations against the government of Uruguay related to Fray Bentos pulp mill,
and in Argentina, one such litigation against the company operating the pulp
mill.
Risk factors
Expected decisions on the proposed EU Energy Package have increased uncertainty
on how the proposed policies and measures will impact the availability and cost
of wood fibre for wood processing industries in Europe. At the same time,
global competition for fibres has already created disruptions in fibre
availability resulting in volatile price developments.
Events after the balance sheet date
The Group's management is not aware of any significant events occurring after
30 September 2010.
Outlook for the fourth quarter of 2010
Comparisons with the third quarter of the year
Economic indicators point to a slower momentum of recovery in Europe and a
subdued economic growth in the US. These are expected to limit continuation of
demand rebound and recovery in investment activities. A robust economic growth
in emerging market is expected to continue but, on the other hand, this has
resulted in strong demand and higher prices for important commodities.
The electricity generation volume is estimated to be higher. Based on current
forward sale agreements and Nordpool forward prices, the average sales price
for electricity is estimated to be somewhat higher.
Chemical pulp price on average is expected to be lower. Current pulp prices in
USD are not expected to change materially. Pulp prices in euro are lower due to
weaker USD. Deliveries are expected to be about the same.
The cost of wood raw material will be higher; both log and fibre wood prices
have remained at a high level despite a short spell in increase of supply due
to
storms in Finland during August. Sawn timber deliveries are estimated to be
about the same but average price is expected be slightly lower.
Both the average paper price in euro and paper deliveries are expected be about
the same. Paper prices in invoicing currencies are expected to be higher but
weaker USD will lower average price in euro. Market balance has improved from
last year. The company aims to increase prices in all new contracts to
compensate already materialised increases in main material costs.
Demand growth for self-adhesive labelstock in the main markets is expected to
continue, albeit at a more moderate pace. Prices are expected to be higher. An
intense cost pressure continues and will at least temporarily challenge current
sales margins.
Plywood deliveries and prices are expected to be about the same. In industrial
end uses business prospects have improved.
For the Group both sales prices in euro and deliveries are estimated to be in
line with the third quarter. Increases in variable costs continue. Outlook for
the operating profit, excluding special items, for the year remains unchanged.
Business Area Reviews
Energy
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 124 116 174 128 108 100 136 414
EBITDA, EURm 1) 48 39 79 57 35 41 57 166
% of sales 38.7 33.6 45.4 44.5 32.4 41.0 41.9 40.1
Share of results of -3 6 4 -8 -24 -4 -4 7
associated companies and
joint ventures, EURm
Depreciation, amortisation -1 -1 -2 -2 -1 -1 -2 -4
and impairment charges, EURm
Operating profit, EURm 44 44 81 47 10 36 51 169
% of sales 35.5 37.9 46.6 36.7 9.3 36.0 37.5 40.8
Special items, EURm 2) - - - -1 -17 - - -
Operating profit excl. 44 44 81 48 27 36 51 169
special items, EURm
% of sales 35.5 37.9 46.6 37.5 25.0 36.0 37.5 40.8
Electricity deliveries, 1,000 2,276 2,303 2,411 2,277 2,103 1,999 2,486 6,990
MWh
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 344 472
EBITDA, EURm 1) 133 190
% of sales 38.7 40.3
Share of results of -32 -40
associated companies and
joint ventures, EURm
Depreciation, amortisation -4 -6
and impairment charges, EURm
Operating profit, EURm 97 144
% of sales 28.2 30.5
Special items, EURm 2) -17 -18
Operating profit excl. 114 162
special items, EURm
% of sales 33.1 34.3
Electricity deliveries, 1,000 6,588 8,865
MWh
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2009, special items relate to impairments of associated company Pohjolan
Voima's two power plants.
Q3 of 2010 compared with Q3 of 2009
Operating profit excluding special items was EUR 44 million, EUR 17 million
higher than last year (27 million). Sales increased by 15% to EUR 124 million
(108 million), of which EUR 31 million was external sales (24 million). The
electricity sales volume was 2.3 TWh in the quarter (2.1 TWh). Hydropower
volume was 24% higher in comparison with last year.
January-September 2010 compared with January-September 2009
Operating profit excluding special items was EUR 169 million (114 million).
Sales increased by 20% to EUR 414 million (344 million), of which EUR 160
million was external sales (97 million). The electricity sales volume was 7.0
TWh (6.6 TWh).
Profitability improved in comparison with the previous year, due to the higher
sales price and higher electricity sales volume. The average electricity sales
price increased almost by 16% to EUR 49.9/MWh (43.1/MWh). Both condensing and
hydropower volumes were higher in comparison with last year.
Market review
The average electricity system price in the Nordic electricity exchange in the
first nine months of the year was EUR 50.0/MWh, 45% higher than in the same
period last year (34.5/ MWh) due to the weak hydropower situation and increased
industrial consumption.
Oil and coal market prices increased compared to the same period last year. The
CO2 emissions allowance price was EUR 15.4/t on 30 September, 14% higher than
on the same date last year. At the end of September Nordic water reservoirs
were about 19% (-22.3 TWh) below their long-term average at the same time of
year.
The electricity system forward price for the rest of the year on the Nordic
electricity exchange was EUR 50.5/MWh on 30 September, 61% higher than on the
same date last year (31.4/MWh).
Pulp
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 489 455 341 226 156 132 139 1,285
EBITDA, EURm 1) 239 199 120 53 8 -24 -55 558
% of sales 48.9 43.7 35.2 23.5 5.1 -18.2 -39.6 43.4
Change in fair value of -2 - - -1 - - - -2
biological assets and wood
harvested, EURm
Share of results of - - - 7 4 -16 -47 -
associated companies and
joint ventures, EURm 3)
Depreciation, amortisation -38 -37 -36 -24 -21 -20 -20 -111
and impairment charges, EURm
Operating profit, EURm 199 163 83 35 -9 -60 -122 445
% of sales 40.7 35.8 24.3 15.5 -5.8 -45.5 -87.8 34.6
Special items, EURm 2) - 1 -1 - - - -29 -
Operating profit excl. 199 162 84 35 -9 -60 -93 445
special items, EURm
% of sales 40.7 35.6 24.6 15.5 -5.8 -45.5 -66.9 34.6
Pulp deliveries, 1,000 t 752 768 700 550 446 391 372 2,220
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 427 653
EBITDA, EURm 1) -71 -18
% of sales -16.6 -2.8
Change in fair value of - -1
biological assets and wood
harvested, EURm
Share of results of -59 -52
associated companies and
joint ventures, EURm 3)
Depreciation, amortisation -61 -85
and impairment charges, EURm
Operating profit, EURm -191 -156
% of sales -44.7 -23.9
Special items, EURm 2) -29 -29
Operating profit excl. -162 -127
special items, EURm
% of sales -37.9 -19.4
Pulp deliveries, 1,000 t 1,209 1,759
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2009, special items of EUR 29 million relate to the associated company
Metsä-Botnia's Kaskinen pulp mill closure.
3) In the balance sheet in the interim report for January-June, on 30 June
2009, UPM has regrouped the 30% transferable share of Botnia's book value as
assets held for sale. Consequently, from July 2009, UPM has not included the
share of the transferable Botnia operations in the share of results of
associated companies.
Q3 of 2010 compared with Q3 of 2009
As of December 2009, the Fray Bentos pulp mill and Forestal Oriental eucalyptus
plantation forestry company in Uruguay have been included in the Pulp business
area and Metsä-Botnia is no longer an associated company of UPM.
Operating profit excluding special items was EUR 199 million (loss of EUR 9
million). Sales increased to EUR 489 million (156 million) and deliveries to
752,000 tonnes (446,000).
Profitability improved in comparison with last year due to higher pulp sales
prices and volumes.
January-September 2010 compared with January-September 2009
Operating profit excluding special items was EUR 445 million (loss of EUR 162
million). Sales increased to EUR 1,285 million (427 million) and deliveries to
2,220,000 tonnes (1,209,000).
Profitability improved significantly from last year due to higher pulp sales
prices and volumes. External sales represented about 23% of total sales. Wood
costs were lower.
Market review
Due to a tight market balance, global chemical market prices increased until
August 2010 but then levelled off and started to decline slightly towards end
the of the period as Chinese buyers significantly reduced their pulp purchases
in the third quarter of 2010.
During the first half of the year the global chemical market pulp supply was
reduced temporarily due to the earthquake in Chile, along with other occasional
supply constrains. During the summer the chemical pulp supply returned back to
normal.
Global chemical pulp shipments were slightly below last year. The shipments to
China were significantly lower compared to previous year, especially during the
third quarter, but the shipments grew to other regions. The pulp producer
inventories returned to normal during the third quarter of 2010.
The average softwood pulp (NBSK) market price in euro terms, at EUR 705/tonne,
was 55% higher than in the same period last year (EUR 454/tonne). At the end of
the period the NBSK market price was EUR 725/tonne.
The average hardwood pulp (BHKP) market price in euro terms increased by 66%
from last year, to EUR 640/tonne (EUR 385/tonne). At the end of the period the
BHKP market price was EUR 649/tonne.
Forest and timber
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 387 393 339 348 295 309 385 1,119
EBITDA, EURm 1) 18 26 3 30 24 -15 -15 47
% of sales 4.7 6.6 0.9 8.6 8.1 -4.9 -3.9 4.2
Change in fair value of 16 31 19 10 -13 10 11 66
biological assets and wood
harvested, EURm
Share of results of 2 1 1 1 -1 1 1 4
associated companies and
joint ventures, EURm
Depreciation, amortisation -5 -6 -4 -11 -4 -14 -5 -15
and impairment charges, EURm
Operating profit, EURm 68 52 19 21 6 -18 -18 139
% of sales 17.6 13.2 5.6 6.0 2.0 -5.8 -4.7 12.4
Special items, EURm 2) 37 - - -14 1 -8 -10 37
Operating profit excl. 31 52 19 35 5 -10 -8 102
special items, EURm
% of sales 8.0 13.2 5.6 10.1 1.7 -3.2 -2.1 9.1
Sawn timber deliveries, 1,000 m3 428 504 371 413 355 366 363 1,303
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 989 1,337
EBITDA, EURm 1) -6 24
% of sales -0.6 1.8
Change in fair value of 8 18
biological assets and wood
harvested, EURm
Share of results of 1 2
associated companies and
joint ventures, EURm
Depreciation, amortisation -23 -34
and impairment charges, EURm
Operating profit, EURm -30 -9
% of sales -3.0 -0.7
Special items, EURm 2) -17 -31
Operating profit excl. -13 22
special items, EURm
% of sales -1.3 1.6
Sawn timber deliveries, 1,000 1,084 1,497
m3
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items of EUR 33 million in the third quarter of 2010, relate to a
capital gain from selling a conservation easement in Minnesota. Other special
items of EUR 4 million relate to a capital gain and reversals of restructuring
provisions of Timber operations in Finland. Special items of EUR 14 million
including impairment charges of EUR 5 million, in the fourth quarter of 2009
relate to restructuring of Timber operations in Finland. Special items for the
second quarter of 2009 include impairment charges of EUR 8 million related to
wood procurement operations. In the first quarter of 2009, special items of
EUR 10 million relate to the sales loss of Miramichi's forestry and sawmilling
operations' assets.
Q3 of 2010 compared with Q3 of 2009
Operating profit excluding special items was EUR 31 million (5 million). Sales
increased by 31% to EUR 387 million (295 million). Sawn timber deliveries
increased by 21% to 428,000 cubic metres (355,000).
The increase in the fair value of biological assets net of wood harvested was
EUR 16 million (13 million negative). The increase in the fair value of
biological assets (growing trees) was EUR 35 million (11 million). The cost of
wood raw material harvested from the Group's own forests was EUR 19 million (24
million).
UPM's own forests in Finland were damaged due to storms during the third
quarter of 2010. The estimated amount of felled wood is approximately 700,000
cubic metres. Most of the felled wood will be harvested by the end of the year
2010.
January-September 2010 compared with January-September 2009
Operating profit excluding special items was EUR 102 million (loss of EUR 13
million). Sales increased by 13% to EUR 1,119 million (989 million). Sawn
timber deliveries increased by 20% to 1,303,000 cubic metres (1,084,000).
Profitability improved from the same period last year mainly due to higher
delivery volumes of timber products and higher average sawn timber prices.
The increase in the fair value of biological assets net of wood harvested was
EUR 66 million (8 million). The increase in the fair value of biological assets
(growing trees) was EUR 128 million (46 million). The cost of wood raw material
harvested from the Group's own forests was EUR 62 million (38 million).
Market review
Wood purchase volumes returned to long-term average levels towards the end of
the period. During the first nine months of the year, wood purchases in the
Finnish wood market were 22.1 million cubic metres, which was four times higher
than in the same period last year. The increased market activity in Finland was
also partly stimulated by storm impact and temporary tax relief that is valid
until the end of the year.
Both pulpwood and log market prices in Finland increased in comparison with the
prices of the last year being above the long-term average prices. During the
third quarter of 2010, wood prices declined temporarily due to storm impact but
returned to the pre-storm levels towards the end of the period.
The European demand for sawn softwood timber continued to be weak due to low
building activity. Market activity slowed down during the third quarter of 2010
after seasonal upturn in the summer. Demand in the export markets weakened
towards the end of the period due to seasonal variation.
Paper
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 1,672 1,540 1,401 1,558 1,454 1,388 1,367 4,613
EBITDA, EURm 1) 67 72 75 221 274 247 187 214
% of sales 4.0 4.7 5.4 14.2 18.8 17.8 13.7 4.6
Share of results of - - - 1 - -1 -1 -
associated companies and
joint ventures, EURm
Depreciation, amortisation -131 -130 -136 -140 -142 -147 -149 -397
and impairment charges, EURm
Operating profit, EURm -71 -57 -69 74 126 85 60 -197
% of sales -4.2 -3.7 -4.9 4.7 8.7 6.1 4.4 -4.3
Special items, EURm 2) -7 4 -8 -8 -6 -10 23 -11
Operating profit excl. -64 -61 -61 82 132 95 37 -186
special items, EURm
% of sales -3.8 -4.0 -4.4 5.3 9.1 6.8 2.7 -4.0
Deliveries, publication 1,633 1,446 1,364 1,576 1,464 1,323 1,304 4,443
papers, 1,000 t
Deliveries, fine and 947 994 937 945 872 813 724 2,878
speciality papers, 1,000 t
Paper deliveries total, 1,000t 2,580 2,440 2,301 2,521 2,336 2,136 2,028 7,321
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 4,209 5,767
EBITDA, EURm 1) 708 929
% of sales 16.8 16.1
Share of results of -2 -1
associated companies and
joint ventures, EURm
Depreciation, amortisation -438 -578
and impairment charges, EURm
Operating profit, EURm 271 345
% of sales 6.4 6.0
Special items, EURm 2) 7 -1
Operating profit excl. 264 346
special items, EURm
% of sales 6.3 6.0
Deliveries, publication 4,091 5,667
papers, 1,000 t
Deliveries, fine and 2,409 3,354
speciality papers, 1,000 t
Paper deliveries total, 1,000t 6,500 9,021
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items in the third quarter of 2010, relate to restructuring charges.
In 2010, special items in the second quarter include impairment reversals of
EUR 3 million. Other special items in the first and second quarter of 2010,
include mainly employee-related restructuring charges. In the fourth and third
quarter of 2009, special items of EUR 8 million and EUR 6 million relate to
restructuring charges. Special items for the second quarter of 2009 include
charges of EUR 9 million related to personnel reduction in Nordland mill,
impairment reversals of EUR 4 million and other restructuring charges of EUR 5
million. In the first quarter of 2009, special items include an income of
EUR 31 million related to the sale of the assets of the former Miramichi paper
mill and charges of EUR 8 million related to restructuring measures.
Q3 of 2010 compared with Q3 of 2009
Operating loss excluding special items was EUR 64 million (profit of EUR 132
million). Sales were EUR 1,672 million (1,454 million). Paper deliveries
increased by 10% to 2,580,000 tonnes (2,336,000). Publication paper deliveries
(magazine papers and newsprint) increased by 12% from last year. Fine and
speciality paper deliveries increased by 9%. Deliveries grew especially in
North America. In Europe, deliveries grew broadly in line with the market.
The Paper business area incurred an operating loss, as the cost of fibre
increased significantly from last year.
Higher paper prices and delivery volumes had a positive impact on operating
profit. The average paper price for all paper deliveries when translated into
euros was 4% higher than last year. Compared with the second quarter of 2010,
the average paper price increased by around 3%. Prices increased across all
paper grades.
January-September 2010 compared with January-September 2009
Operating loss excluding special items was EUR 186 million (profit of EUR 264
million). Sales were EUR 4,613 million (4,209 million). Paper deliveries
increased by 13% to 7,321,000 tonnes (6,500,000). Publication paper deliveries
(magazine papers and newsprint) increased by 9% and fine and speciality paper
deliveries by 19% from last year. Deliveries grew in all main markets.
The Paper business area incurred an operating loss, as the cost of fibre
increased significantly from last year and paper prices decreased. The average
paper price for all paper deliveries when translated into euros was 3% lower
than last year.
Higher paper deliveries had a positive impact on operating profit.
Market review
Demand for publication papers in Europe increased by 4% and for fine papers by
7% from last year. In North America, demand for magazine papers was 6% higher
than a year ago. In Asia, demand for fine papers grew. Demand for speciality
papers grew in all main markets.
In Europe, magazine paper prices decreased at the start of the year, but
increased in the third quarter. On average, magazine paper prices in euros in
the first nine months were 7% lower than last year. Newsprint prices also
decreased at the start of the year and were on average 17% lower than last
year. Fine paper prices increased throughout the period and were on average 4%
higher than last year. Prices for speciality papers increased from last year.
In North America, the average US dollar price for magazine papers was 7% lower
than last year. In Asia, market prices for fine papers increased in the first
half of the year and decreased slightly in the third quarter.
Label
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 284 280 260 252 242 226 223 824
EBITDA, EURm 1) 33 34 31 25 29 18 6 98
% of sales 11.6 12.1 11.9 9.9 12.0 8.0 2.7 11.9
Depreciation, amortisation -8 -10 -7 -8 -9 -11 -9 -25
and impairment charges,
EURm
Operating profit, EURm 25 24 24 16 18 4 -3 73
% of sales 8.8 8.6 9.2 6.3 7.4 1.8 -1.3 8.9
Special items, EURm 2) 1 - 1 -1 -2 -5 - 2
Operating profit excl. 24 24 23 17 20 9 -3 71
special items, EURm
% of sales 8.5 8.6 8.8 6.7 8.3 4.0 -1.3 8.6
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 691 943
EBITDA, EURm 1) 53 78
% of sales 7.7 8.3
Depreciation, amortisation -29 -37
and impairment charges,
EURm
Operating profit, EURm 19 35
% of sales 2.7 3.7
Special items, EURm 2) -7 -8
Operating profit excl. 26 43
special items, EURm
% of sales 3.8 4.6
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2010, special items relate to impairment reversals. In the fourth and
third quarter of 2009, special items relate to restructuring charges. In the
second quarter of 2009, special items include impairment charges of EUR 2
million and other restructuring charges of EUR 3 million.
Q3 of 2010 compared with Q3 of 2009
Operating profit excluding special items was EUR 24 million (20 million). Sales
grew by 17% to EUR 284 million (242 million).
Profitability improved slightly from the same period last year. Delivery
volumes and sales prices of self-adhesive label materials increased from last
year. Raw material costs were higher.
Sales prices increased in the third quarter from the second quarter of 2010,
but in most regions not enough to fully compensate for the rise in raw material
costs.
January-September 2010 compared with January-September 2009
Operating profit excluding special items was EUR 71 million (26 million). Sales
grew by 19% to EUR 824 million (691 million).
Profitability improved noticeably from last year, mainly due to higher sales
volumes. Delivery volumes of self-adhesive label materials increased in all
regions from last year. Volume growth was highest in Eastern Europe and Asia.
Average sales prices increased from last year.
Market review
Demand for self-adhesive label materials grew noticeably in the first six
months from the depressed level seen in the same period last year. Demand also
continued to grow in the third quarter, although at a slower pace.
Demand growth has continued strongly in Eastern Europe, Asia Pacific and Latin
America. In mature markets in Western Europe and North America, demand
recovered to close to pre-recession levels.
Plywood
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 83 97 76 81 73 77 75 256
EBITDA, EURm 1) 2 2 -2 3 -5 -5 -23 2
% of sales 2.4 2.1 -2.6 3.7 -6.8 -6.5 -30.7 0.8
Depreciation, amortisation -5 -5 -5 -12 -5 -5 -5 -15
and impairment charges, EURm
Operating profit, EURm -4 -1 -7 -33 -10 -10 -29 -12
% of sales -4.8 -1.0 -9.2 -40.7 -13.7 -13.0 -38.7 -4.7
Special items, EURm 2) -1 2 - -30 - - -1 1
Operating profit excl. -3 -3 -7 -3 -10 -10 -28 -13
special items, EURm
% of sales -3.6 -3.1 -9.2 -3.7 -13.7 -13.0 -37.3 -5.1
Deliveries, plywood, 1,000 m3 156 182 140 150 143 141 133 478
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 225 306
EBITDA, EURm 1) -33 -30
% of sales -14.7 -9.8
Depreciation, amortisation -15 -27
and impairment charges, EURm
Operating profit, EURm -49 -82
% of sales -21.8 -26.8
Special items, EURm 2) -1 -31
Operating profit excl. -48 -51
special items, EURm
% of sales -21.3 -16.7
Deliveries, plywood, 1,000 m3 417 567
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items in 2010, include mainly a capital gain from asset sale in
Finland. Special items in the fourth quarter of 2009, include impairment
charges of EUR 6 million and other restructuring charges of EUR 24 million.
Q3 of 2010 compared with Q3 of 2009
Operating loss excluding special items was EUR 3 million (loss of EUR 10
million). Sales grew by 14% to EUR 83 million (73 million), as plywood
deliveries grew by 9% to 156,000 cubic metres (143,000) and sales prices
increased.
Operating loss for Plywood decreased from last year, mainly due to higher sales
prices and delivery volumes.
January-September 2010 compared with January-September 2009
Operating loss excluding special items was EUR 13 million (loss of EUR 48
million). Sales grew by 14% to EUR 256 million (225 million), as plywood
deliveries grew by 15% to 478,000 cubic metres (417,000).
Operating loss for Plywood decreased from last year, mainly due to higher
delivery volumes. UPM's delivery volumes benefited from supply constraints of
some Chilean and Russian competitors. Variable costs were lower than last year.
Sales prices for plywood have increased from the early part of the year. On
average, plywood sales prices were at the same level as last year.
Market review
In Europe, in January-September, plywood demand increased from last year.
Demand started to improve in various industrial end-use areas, but the recovery
remained weak in construction end-uses.
The overall plywood market prices remained low during the first nine months of
the year, even though they increased during the third quarter.
Other operations
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
2010 2010 2010 2009 2009 2009 2009 2010
Sales, EURm 45 51 40 35 21 21 34 136
EBITDA, EURm 1) -23 -19 -18 -27 -31 -24 -29 -60
Share of results of -1 1 -2 - - -2 -2 -2
associated companies and
joint ventures, EURm
Depreciation, amortisation -2 -3 -3 -3 -3 -3 -3 -8
and impairment charges, EURm
Operating profit, EURm -23 -22 -24 -34 -45 -29 -34 -69
Special items, EURm 2) 4 -3 -1 -6 -11 - - -
Operating profit excl. -27 -19 -23 -28 -34 -29 -34 -69
special items, EURm
Q1-Q3/ Q1-Q4/
2009 2009
Sales, EURm 76 111
EBITDA, EURm 1) -84 -111
Share of results of -4 -4
associated companies and
joint ventures, EURm
Depreciation, amortisation -9 -12
and impairment charges, EURm
Operating profit, EURm -108 -142
Special items, EURm 2) -11 -17
Operating profit excl. -97 -125
special items, EURm
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items in the third quarter of 2010, include mainly a capital gain
from asset sale in Finland. Other special items in 2010, relate to net
restructuring charges. In 2009, special items in the fourth quarter include
impairment charges of EUR 2 million and other charges of EUR 4 million both
relating to terminated activities. Special items of EUR 11 million in the third
quarter of 2009 relate mainly to estates of closed industrial sites in Finland.
Other operations include development units (RFID tags, the wood plastic
composite unit UPM ProFi and biofuels), logistic services and corporate
administration.
Q3 of 2010 compared with Q3 of 2009
Operating loss excluding special items was EUR 27 million (loss of EUR 34
million). Sales amounted to EUR 45 million (21 million).
The development units incurred a smaller operating loss than last year.
January-September 2010 compared with January-September 2009
Operating loss excluding special items was EUR 69 million (loss of EUR 97
million). Sales amounted to EUR 136 million (76 million).
The development units incurred a smaller operating loss than last year.
Helsinki, 28 October 2010
UPM-Kymmene Corporation
Board of Directors
Financial Information
This Iterim Report is unaudited
Consolidated income statement
EURm Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2010 2009 2009
Sales 2,312 1,913 6,567 5,611 7,719
Other operating income 42 5 68 29 47
Costs and expenses -1,938 -1,603 -5,585 -4,964 -6,774
Change in fair value of 14 -13 64 8 17
biological assets and wood harvested
Share of results of associated -2 -21 9 -96 -95
companies and joint ventures
Depreciation, amortisation -190 -185 -575 -579 -779
and impairment charges
Operating profit (loss) 238 96 548 9 135
Gains on available-for-sale - -1 1 -1 -1
investments, net
Exchange rate and fair value -11 -3 -6 -9 -9
gains and losses
Interest and other finance -28 -28 -81 -123 62
costs, net
Profit (loss) before tax 199 64 462 -124 187
Income taxes -21 -24 -45 -2 -18
Profit (loss) for the period 178 40 417 -126 169
Attributable to:
Owners of the parent company 178 40 417 -126 169
Non-controlling interests - - - - -
178 40 417 -126 169
Earnings per share for profit (loss)
attributable to owners of the parent company
Basic earnings per share, EUR 0.34 0.08 0.80 -0.24 0.33
Diluted earnings per share, EUR 0.34 0.08 0.80 -0.24 0.33
Consolidated statement of comprehensive income
EURm Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2010 2009 2009
Profit (loss) for the period 178 40 417 -126 169
Other comprehensive income
for the period, net of tax:
Translation differences -317 -16 182 50 165
Net investment hedge 50 -17 -38 -37 -56
Cash flow hedges 55 18 -24 9 -4
Available-for-sale investments 2 - 7 - 21
Share of other comprehensive 1 -2 3 -10 30
income of associated companies
Other comprehensive income -209 -17 130 12 156
for the period, net of tax
Total comprehensive income -31 23 547 -114 325
for the period
Total comprehensive income attributable to:
Owners of the parent company -31 23 547 -114 325
Non-controlling interests - - - - -
-31 23 547 -114 325
Condensed consolidated balance sheet
EURm 30.09.2010 30.09.2009 31.12.2009
ASSETS
Non-current assets
Goodwill 1,024 933 1,017
Other intangible assets 436 390 423
Property, plant and equipment 5,894 5,253 6,192
Biological assets 1,347 1,126 1,293
Investments in associated 567 801 553
companies and joint ventures
Deferred tax assets 340 244 287
Other non-current assets 973 644 816
10,581 9,391 10,581
Current assets
Inventories 1,320 1,011 1,112
Trade and other receivables 1,636 1,460 1,474
Cash and cash equivalents 484 367 438
3,440 2,838 3,024
Assets classified as held for sale - 327 -
Total assets 14,021 12,556 13,605
EQUITY AND LIABILITIES
Equity attributable to owners of the parent company
Share capital 890 890 890
Fair value and other reserves 111 -155 -23
Reserve for invested 1,145 1,145 1,145
non-restricted equity
Retained earnings 4,758 3,908 4,574
6,904 5,788 6,586
Non-controlling interests 16 14 16
Total equity 6,920 5,802 6,602
Non-current liabilities
Deferred tax liabilities 631 590 608
Non-current interest-bearing 4,034 3,941 4,164
liabilities
Other non-current liabilities 636 595 660
5,301 5,126 5,432
Current liabilities
Current interest-bearing 423 429 300
liabilities
Trade and other payables 1,377 1,199 1,271
1,800 1,628 1,571
Total liabilities 7,101 6,754 7,003
Total equity and liabilities 14,021 12,556 13,605
Consolidated statement of changes in equity
Attributable to owners of the parent company
EURm Share Translation Fair value
capital differences and other
reserves
Balance at 1 January 2009 890 -295 130
Profit (loss) for the period - - -
Translation differences - 50 -
Net investment hedge, net of tax - -37 -
Cash flow hedges, net of tax - - 9
Available-for-sale investments - - -
Share of other comprehensive - -15 -
income of associated companies
Total comprehensive income - -2 9
for the period
Share-based compensation, net of tax - - 3
Dividend paid - - -
Other items - - -
Total transactions with - - 3
owners for the period
Balance at 30 September 2009 890 -297 142
Balance at 1 January 2010 890 -164 141
Profit (loss) for the period - - -
Translation differences - 182 -
Net investment hedge, net of tax - -38 -
Cash flow hedges, net of tax - - -24
Available-for-sale investments - - 7
Share of other comprehensive - - -
income of associated companies
Total comprehensive income - 144 -17
for the period
Share-based compensation, net of tax - - 7
Dividend paid - - -
Other items - - -
Total transactions with - - 7
owners for the period
Balance at 30 September 2010 890 -20 131
EURm Reserve Retained Total
for invested earnings
non-restricted
equity
Balance at 1 January 2009 1,145 4,236 6,106
Profit (loss) for the period - -126 -126
Translation differences - - 50
Net investment hedge, net of tax - - -37
Cash flow hedges, net of tax - - 9
Available-for-sale investments - - -
Share of other comprehensive - 5 -10
income of associated companies
Total comprehensive income - -121 -114
for the period
Share-based compensation, net of tax - - 3
Dividend paid - -208 -208
Other items - 1 1
Total transactions with - -207 -204
owners for the period
Balance at 30 September 2009 1,145 3,908 5,788
Balance at 1 January 2010 1,145 4,574 6,586
Profit (loss) for the period - 417 417
Translation differences - - 182
Net investment hedge, net of tax - - -38
Cash flow hedges, net of tax - - -24
Available-for-sale investments - - 7
Share of other comprehensive - 3 3
income of associated companies
Total comprehensive income - 420 547
for the period
Share-based compensation, net of tax - - 7
Dividend paid - -234 -234
Other items - -2 -2
Total transactions with - -236 -229
owners for the period
Balance at 30 September 2010 1,145 4,758 6,904
EURm Non- Total
controlling equity
interests
Balance at 1 January 2009 14 6,120
Profit (loss) for the period - -126
Translation differences - 50
Net investment hedge, net of tax - -37
Cash flow hedges, net of tax - 9
Available-for-sale investments - -
Share of other comprehensive - -10
income of associated companies
Total comprehensive income - -114
for the period
Share-based compensation, net of tax - 3
Dividend paid - -208
Other items - 1
Total transactions with - -204
owners for the period
Balance at 30 September 2009 14 5,802
Balance at 1 January 2010 16 6,602
Profit (loss) for the period - 417
Translation differences - 182
Net investment hedge, net of tax - -38
Cash flow hedges, net of tax - -24
Available-for-sale investments - 7
Share of other comprehensive - 3
income of associated companies
Total comprehensive income - 547
for the period
Share-based compensation, net of tax - 7
Dividend paid - -234
Other items - -2
Total transactions with - -229
owners for the period
Balance at 30 September 2010 16 6,920
Condensed consolidated cash flow statement
EURm Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2009
Cash flow from operating activities
Profit (loss) for the period 417 -126 169
Adjustments 552 735 772
Change in working capital -237 437 532
Cash generated from operations 732 1,046 1,473
Finance costs, net -67 -135 -183
Income taxes paid -26 -22 -31
Net cash generated from 639 889 1,259
operating activities
Cash flow from investing activities
Acquisitions and share purchases -4 - -586
Capital expenditure -150 -191 -236
Asset sales and other 49 36 608
investing cash flow
Net cash used in investing -105 -155 -214
activities
Cash flow from financing activities
Change in loans and other -261 -489 -732
financial items
Dividends paid -234 -208 -208
Net cash used in financing -495 -697 -940
activities
Change in cash and cash 39 37 105
equivalents
Cash and cash equivalents at 438 330 330
the beginning of period
Foreign exchange effect on cash 7 - 3
Change in cash and cash 39 37 105
equivalents
Cash and cash equivalents at 484 367 438
end of period
Quarterly information
EURm Q3/ Q2/ Q1/ Q4/ Q3/ Q2/
2010 2010 2010 2009 2009 2009
Sales 2,312 2,216 2,039 2,108 1,913 1,841
Other operating income 42 17 9 18 5 7
Costs and expenses -1,938 -1,877 -1,770 -1,810 -1,603 -1,627
Change in fair value of 14 31 19 9 -13 10
biological assets and wood harvested
Share of results of associated -2 8 3 1 -21 -22
companies and joint ventures
Depreciation, amortisation -190 -192 -193 -200 -185 -201
and impairment charges
Operating profit (loss) 238 203 107 126 96 8
Gains on available-for-sale - 1 - - -1 -
investments, net
Exchange rate and fair value -11 4 1 - -3 3
gains and losses
Interest and other finance -28 -27 -26 185 -28 -37
costs, net
Profit (loss) before tax 199 181 82 311 64 -26
Income taxes -21 -12 -12 -16 -24 18
Profit (loss) for the period 178 169 70 295 40 -8
Attributable to:
Owners of the parent company 178 169 70 295 40 -8
Non-controlling interests - - - - - -
178 169 70 295 40 -8
Basic earnings per share, EUR 0.34 0.33 0.13 0.57 0.08 -0.02
Diluted earnings per share, EUR 0.34 0.33 0.13 0.57 0.08 -0.02
Earnings per share, excluding 0.28 0.29 0.15 0.21 0.14 0.03
special items, EUR
Average number of shares 519,970 519,970 519,970 519,958 519,954 519,954
basic (1,000)
Average number of shares 521,742 521,333 520,018 518,876 521,036 519,954
diluted (1,000)
Special items in operating 34 4 -9 -60 -35 -23
profit (loss)
Operating profit (loss), 204 199 116 186 131 31
excl. special items
% of sales 8.8 9.0 5.7 8.8 6.8 1.7
Special items before tax 34 4 -9 155 -35 -23
Profit (loss) before tax, 165 177 91 156 99 -3
excl. special items
% of sales 7.1 8.0 4.5 7.4 5.2 -0.2
Return on equity, excl. 8.6 8.9 4.6 7.4 5.0 0.8
special items, %
Return on capital employed, 6.8 7.3 4.3 7.2 4.9 1.3
excl. special items, %
EBITDA 384 353 288 362 334 238
% of sales 16.6 15.9 14.1 17.2 17.5 12.9
Share of results of associated
companies and joint ventures
Energy -3 6 4 -8 -24 -4
Pulp - - - 7 4 -16
Forest and timber 2 1 1 1 -1 1
Paper - - - 1 - -1
Other operations -1 1 -2 - - -2
Total -2 8 3 1 -21 -22
EURm Q1/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2009 2010 2009 2009
Sales 1,857 6,567 5,611 7,719
Other operating income 17 68 29 47
Costs and expenses -1,734 -5,585 -4,964 -6,774
Change in fair value of 11 64 8 17
biological assets and wood harvested
Share of results of associated -53 9 -96 -95
companies and joint ventures
Depreciation, amortisation -193 -575 -579 -779
and impairment charges
Operating profit (loss) -95 548 9 135
Gains on available-for-sale - 1 -1 -1
investments, net
Exchange rate and fair value -9 -6 -9 -9
gains and losses
Interest and other finance -58 -81 -123 62
costs, net
Profit (loss) before tax -162 462 -124 187
Income taxes 4 -45 -2 -18
Profit (loss) for the period -158 417 -126 169
Attributable to:
Owners of the parent company -158 417 -126 169
Non-controlling interests - - - -
-158 417 -126 169
Basic earnings per share, EUR -0.30 0.80 -0.24 0.33
Diluted earnings per share, EUR -0.30 0.80 -0.24 0.33
Earnings per share, excluding -0.27 0.72 -0.10 0.11
special items, EUR
Average number of shares 519,954 519,970 519,954 519,955
basic (1,000)
Average number of shares 519,954 521,031 520,315 519,955
diluted (1,000)
Special items in operating -17 29 -75 -135
profit (loss)
Operating profit (loss), -78 519 84 270
excl. special items
% of sales -4.2 7.9 1.5 3.5
Special items before tax -17 29 -75 80
Profit (loss) before tax, -145 433 -49 107
excl. special items
% of sales -7.8 6.6 -0.9 1.4
Return on equity, excl. neg. 7.4 neg. 1.0
special items, %
Return on capital employed, neg. 6.1 0.9 2.5
excl. special items, %
EBITDA 128 1,025 700 1,062
% of sales 6.9 15.6 12.5 13.8
Share of results of associated
companies and joint ventures
Energy -4 7 -32 -40
Pulp -47 - -59 -52
Forest and timber 1 4 1 2
Paper -1 - -2 -1
Other operations -2 -2 -4 -4
Total -53 9 -96 -95
Deliveries
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2010 2010 2010 2009 2009 2009 2009
Electricity, 1,000 MWh 2,276 2,303 2,411 2,277 2,103 1,999 2,486
Pulp, 1,000 t 752 768 700 550 446 391 372
Sawn timber, 1,000 m3 428 504 371 413 355 366 363
Publication papers, 1,000 t 1,633 1,446 1,364 1,576 1,464 1,323 1,304
Fine and speciality papers, 947 994 937 945 872 813 724
1,000 t
Paper deliveries total, 1,000t 2,580 2,440 2,301 2,521 2,336 2,136 2,028
Plywood, 1,000 m3 156 182 140 150 143 141 133
Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2009
Electricity, 1,000 MWh 6,990 6,588 8,865
Pulp, 1,000 t 2,220 1,209 1,759
Sawn timber, 1,000 m3 1,303 1,084 1,497
Publication papers, 1,000 t 4,443 4,091 5,667
Fine and speciality papers, 2,878 2,409 3,354
1,000 t
Paper deliveries total, 1,000t 7,321 6,500 9,021
Plywood, 1,000 m3 478 417 567
Quarterly segment information
EURm Q3/ Q2/ Q1/ Q4/
2010 2010 2010 2009
Sales
Energy 124 116 174 128
Pulp 489 455 341 226
Forest and timber 387 393 339 348
Paper 1,672 1,540 1,401 1,558
Label 284 280 260 252
Plywood 83 97 76 81
Other operations 45 51 40 35
Internal sales -772 -716 -592 -520
Sales, total 2,312 2,216 2,039 2,108
EBITDA
Energy 48 39 79 57
Pulp 239 199 120 53
Forest and timber 18 26 3 30
Paper 67 72 75 221
Label 33 34 31 25
Plywood 2 2 -2 3
Other operations -23 -19 -18 -27
EBITDA, total 384 353 288 362
Operating profit (loss)
Energy 44 44 81 47
Pulp 199 163 83 35
Forest and timber 68 52 19 21
Paper -71 -57 -69 74
Label 25 24 24 16
Plywood -4 -1 -7 -33
Other operations -23 -22 -24 -34
Operating profit (loss), total 238 203 107 126
% of sales 10.3 9.2 5.2 6.0
Special items in operating profit
Energy - - - -1
Pulp - 1 -1 -
Forest and timber 37 - - -14
Paper -7 4 -8 -8
Label 1 - 1 -1
Plywood -1 2 - -30
Other operations 4 -3 -1 -6
Special items in operating 34 4 -9 -60
profit, total
Operating profit (loss)
excl.special items
Energy 44 44 81 48
Pulp 199 162 84 35
Forest and timber 31 52 19 35
Paper -64 -61 -61 82
Label 24 24 23 17
Plywood -3 -3 -7 -3
Other operations -27 -19 -23 -28
Operating profit (loss) excl. 204 199 116 186
special items, total
% of sales 8.8 9.0 5.7 8.8
EURm Q3/ Q2/ Q1/ Q4/
2010 2010 2010 2009
External sales
Energy 31 35 94 38
Pulp 102 106 86 34
Forest and timber 181 193 154 171
Paper 1,636 1,499 1,353 1,500
Label 283 280 259 252
Plywood 79 93 73 77
Other operations - 10 20 36
External sales, total 2,312 2,216 2,039 2,108
Internal sales
Energy 93 81 80 90
Pulp 387 349 255 192
Forest and timber 206 200 185 177
Paper 36 41 48 58
Label 1 - 1 -
Plywood 4 4 3 4
Other operations 45 41 20 -1
Internal sales, total 772 716 592 520
EURm Q3/ Q2/ Q1/ Q1-Q3/
2009 2009 2009 2010
Sales
Energy 108 100 136 414
Pulp 156 132 139 1,285
Forest and timber 295 309 385 1,119
Paper 1,454 1,388 1,367 4,613
Label 242 226 223 824
Plywood 73 77 75 256
Other operations 21 21 34 136
Internal sales -436 -412 -502 -2,080
Sales, total 1,913 1,841 1,857 6,567
EBITDA
Energy 35 41 57 166
Pulp 8 -24 -55 558
Forest and timber 24 -15 -15 47
Paper 274 247 187 214
Label 29 18 6 98
Plywood -5 -5 -23 2
Other operations -31 -24 -29 -60
EBITDA, total 334 238 128 1,025
Operating profit (loss)
Energy 10 36 51 169
Pulp -9 -60 -122 445
Forest and timber 6 -18 -18 139
Paper 126 85 60 -197
Label 18 4 -3 73
Plywood -10 -10 -29 -12
Other operations -45 -29 -34 -69
Operating profit (loss), total 96 8 -95 548
% of sales 5.0 0.4 -5.1 8.3
Special items in operating profit
Energy -17 - - -
Pulp - - -29 -
Forest and timber 1 -8 -10 37
Paper -6 -10 23 -11
Label -2 -5 - 2
Plywood - - -1 1
Other operations -11 - - -
Special items in operating -35 -23 -17 29
profit, total
Operating profit (loss) excl.special items
Energy 27 36 51 169
Pulp -9 -60 -93 445
Forest and timber 5 -10 -8 102
Paper 132 95 37 -186
Label 20 9 -3 71
Plywood -10 -10 -28 -13
Other operations -34 -29 -34 -69
Operating profit (loss) excl. 131 31 -78 519
special items, total
% of sales 6.8 1.7 -4.2 7.9
EURm Q3/ Q2/ Q1/ Q1-Q3/
2009 2009 2009 2010
External sales
Energy 24 24 49 160
Pulp 9 10 10 294
Forest and timber 145 150 152 528
Paper 1,409 1,355 1,327 4,488
Label 243 225 222 822
Plywood 69 73 72 245
Other operations 14 4 25 30
External sales, total 1,913 1,841 1,857 6,567
Internal sales
Energy 84 76 87 254
Pulp 147 122 129 991
Forest and timber 150 159 233 591
Paper 45 33 40 125
Label -1 1 1 2
Plywood 4 4 3 11
Other operations 7 17 9 106
Internal sales, total 436 412 502 2,080
EURm Q1-Q3/ Q1-Q4/
2009 2009
Sales
Energy 344 472
Pulp 427 653
Forest and timber 989 1,337
Paper 4,209 5,767
Label 691 943
Plywood 225 306
Other operations 76 111
Internal sales -1,350 -1,870
Sales, total 5,611 7,719
EBITDA
Energy 133 190
Pulp -71 -18
Forest and timber -6 24
Paper 708 929
Label 53 78
Plywood -33 -30
Other operations -84 -111
EBITDA, total 700 1,062
Operating profit (loss)
Energy 97 144
Pulp -191 -156
Forest and timber -30 -9
Paper 271 345
Label 19 35
Plywood -49 -82
Other operations -108 -142
Operating profit (loss), total 9 135
% of sales 0.2 1.7
Special items in operating profit
Energy -17 -18
Pulp -29 -29
Forest and timber -17 -31
Paper 7 -1
Label -7 -8
Plywood -1 -31
Other operations -11 -17
Special items in operating -75 -135
profit, total
Operating profit (loss) excl.special items
Energy 114 162
Pulp -162 -127
Forest and timber -13 22
Paper 264 346
Label 26 43
Plywood -48 -51
Other operations -97 -125
Operating profit (loss) excl. 84 270
special items, total
% of sales 1.5 3.5
EURm Q1-Q3/ Q1-Q4/
2009 2009
External sales
Energy 97 135
Pulp 29 63
Forest and timber 447 618
Paper 4,091 5,591
Label 690 942
Plywood 214 291
Other operations 43 79
External sales, total 5,611 7,719
Internal sales
Energy 247 337
Pulp 398 590
Forest and timber 542 719
Paper 118 176
Label 1 1
Plywood 11 15
Other operations 33 32
Internal sales, total 1,350 1,870
Changes in property, plant and equipment
EURm Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2009
Book value at beginning of 6,192 5,688 5,688
period
Capital expenditure 119 139 181
Companies acquired - - 1,013
Decreases -14 -14 -20
Depreciation -534 -530 -696
Impairment charges - -6 -14
Impairment reversal 4 4 5
Translation difference and 127 -28 35
other changes
Book value at end of period 5,894 5,253 6,192
Commitments and contingencies
EURm 30.09.2010 30.09.2009 31.12.2009
Own commitments
Mortgages 1) 1,031 760 1,043
On behalf of associated companies
and joint ventures
Guarantees for loans 7 8 8
On behalf of others
Other guarantees - 1 1
Other own commitments
Leasing commitments for the 22 18 24
next 12 months
Leasing commitments for 88 57 60
subsequent periods
Other commitments 86 63 69
1) Mortgages and pledges relate mainly to Uruguayan operations, and to giving
mandatory security for borrowing from Finnish pension insurance companies.
Capital commitments
EURm Completion Total cost By 31.12.2009
Materials recovery facility January 2011 19 -
(MRF), Shotton
Plywood development December 2011 18 -
Energy saving TMP plant, January 2011 16 -
Steyrermühl
Power plant rebuild, Schongau January 2011 12 -
Rebuild of debarking plant, October 2010 25 15
Pietarsaari
EURm Q1-Q3/ After
2010 30.09.2010
Materials recovery facility 7 12
(MRF), Shotton
Plywood development 6 12
Energy saving TMP plant, 4 12
Steyrermühl
Power plant rebuild, Schongau 3 9
Rebuild of debarking plant, 2 8
Pietarsaari
Notional amounts of derivative financial instruments
EURm 30.09.2010 30.09.2009 31.12.2009
Currency derivatives
Forward contracts 3,950 3,696 3,791
Options, bought - 35 20
Options, written - 48 20
Swaps 710 511 514
Interest rate derivatives
Forward contracts 1,924 2,487 3,259
Swaps 2,475 2,947 2,701
Other derivatives
Forward contracts 157 164 25
Options, bought 41 78 73
Options, written 41 78 73
Swaps 1 5 4
Related party (associated companies and joint ventures)
transactions and balances
EURm Q1-Q3/ Q1-Q3/ Q1-Q4/
2010 2009 2009
Sales to associated companies 110 81 114
Purchases from associated 254 384 560
companies
Non-current receivables at 5 2 2
end of period
Trade and other receivables 18 23 23
at end of period
Trade and other payables at 29 30 32
end of period
Basis of preparation
This unaudited interim report has been prepared in accordance with the
accounting policies set out in International Accounting Standard 34 on Interim
Financial Reporting and in the Group's Consolidated Financial Statements for
2009. Income tax expense is recognised based on the best estimate of the
weighted average annual income tax rate expected for the full financial year.
The Group has adopted the following standard:
Amendment to IAS 27 Consolidated and Separate Financial Statements requires the
effects of all transactions with non-controlling interests to be recorded in
equity if there is no change in control and these transactions will no longer
result in goodwill or gains and losses. The standard also specifies the
accounting when control is lost. Any remaining interest in the entity is
re-measured to fair value, and a gain or loss is recognised in profit or loss.
The adoption of the amended standard has changed the name of previous minority
interests to non-controlling interests, and in addition the adoption has
amended the presentation of consolidated statement of changes in equity.
Calculation of key indicators
Return on equity, %:
((Profit before tax - income taxes) / Total equity (average)) x 100
Return on capital employed, %:
(Profit before tax + interest expenses and other financial expenses) /
(Total equity + interest-bearing liabilities (average)) x 100
Earnings per share:
Profit for the period attributable to equity holders of the parent company /
Adjusted average number of shares during the period excluding treasury shares
Key exchange rates for the euro at end of period
30.09.2010 30.06.2010 31.03.2010 31.12.2009
USD 1.3648 1.2271 1.3479 1.4406
CAD 1.4073 1.2890 1.3687 1.5128
JPY 113.68 108.79 125.93 133.16
GBP 0.8600 0.8175 0.8898 0.8881
SEK 9.1421 9.5259 9.7135 10.2520
30.09.2009 30.06.2009 31.03.2009
USD 1.4643 1.4134 1.3308
CAD 1.5709 1.6275 1.6685
JPY 131.07 135.51 131.17
GBP 0.9093 0.8521 0.9308
SEK 10.2320 10.8125 10.9400
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. For more detailed information about risk
factors, see pages 87-88 of the company's annual report 2009.
UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications
UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
media@upm.com
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