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UPM
MEET THE MANAGEMENTMay 26, 2009Helsinki
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.
Forward-looking statement
UPM STRATEGY
Jussi PesonenPresident & CEO
May 26, 2009
PURPOSEWe create value from renewable and recyclable materials by combining expertise and technologies within fibre based, energy-related and engineered materials businesses.
In the new forest industry, we reshape markets through cost leadership, change readiness and leading innovation. We develop smart, sustainable products and solutions for customers worldwide.
VISION
The front-runner of the new forest industry.
STRATEGYUPM's three business groups
Energy and pulp Paper Engineered materials
New business structure leverages the company's competitive advantages
sets the basis for market driven operations in all three Business Groups
develop energy related and pulp businesses
strengthen the cost leadership by optimizing resources, production and investments as well as decreasing complexities in Paper
increase the weight of fast growing higher value added businesses in Engineered Materials
new segment reporting to increase transparency of the results and value creation in the company
STRATEGYEnergy & Pulp
Strategy actions
Grow in biomass based energy incl. biofuels
Leverage high self sufficiency in electricity after OL3 nuclear power plant
Increase share of low cost pulp
Sawmilling for wood and biomass sourcing
Pulp mills
Hydro power assets
Shares of associated companies in pulp and energy
Forests & Timber
Biofuels
STRATEGYPaper
Strategy actions
Focus on European profitability: cost leadership, supply chain management and lean investments
Growth in China and other emerging markets
Consolidation in Europe
Magazine
Newsprint
Fine
Speciality papers
STRATEGYEngineered Materials
Strategy actions
Industry leadership in label materials
Grow in Plywood
Develop new businesses like RFID, Wood plastic composite based on proprietary know how
Label
RFID tags and inlays
Plywood
Wood plastic composites
STRATEGYStrategy actions – portfolio of choices and opportunities
Energy & Pulp
Paper
Engineered Materials
Grow in biomass based energy incl. biofuelsLeverage high self sufficiency in electricity after OL3 nuclear power plantIncrease share of low cost pulp Sawmilling for wood and biomass sourcing
Focus on European profitability: cost leadership, supply chain management and lean investmentsGrowth in China and other emerging marketsConsolidation in Europe
Industry leadership in label materialsGrow in PlywoodDevelop new businesses like RFID, Wood plastic composite based on proprietary know how
Biomass value chain offers strategic opportunities
• forestry• harvesting• sorting on site• drying
Pulpwoodfor pulp and paper
Forest residuesSmall woodStumps
PlywoodSawn timber
PulpPaperCardboard
BiodieselHeatElectricity
Forest biomass Logsfor wood products
Recycling
UPM strategy - Key messages
Long termUPM will reshape its portfolio:
new markets, engineered materials and energy related businesses broaden our scope. Fibre based businesses continue to form the
cornerstone of our strategy.
Short to medium termSecure profitability and cash flow through undisputed cost
leadership.
ENERGY AND PULP
Tapio KorpeinenPresident
May 26, 2009
ENERGY AND PULPContents
Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions
Energy– Hydropower assets and shares in energy companies
Pulp– Pulp mills and the associated company Metsä-Botnia
Forest and timber – UPM's forests, wood procurement, sawmills
Biofuels
ENERGY AND PULP Energy and Pulp Business Group
UPM's capital employed € 11.2 billion
UPM's operating profit € 513 million
(excl. special items)
UPM's sales € 9,461 million
ENERGY AND PULP Strategy – Energy and pulp
DEVELOPMENT AND GROWTH:
Biomass based, nuclear, and hydropower generation
Growth opportunities for pulp
Biofuel development
IMPROVED ASSET BASE:
Major share of UPM's strategic investments since 2003 on energy
Investments on cost competitive pulp
Close uncompetitive pulp capacity
TARGET:
Grow in low cost, emission free energy
Increase the share of low cost pulp
Energy and pulp are developed as market-driven businesses
Electricity– growing demand in Europe and globally– need to replace old fossil fuel-based capacity– integration of the Nordic and central European markets
Pulp– world pulp demand expected to grow regardless of North
American and European paper demand scenario– low paper demand affects availability of recovered paper– capacity growth where wood is cheap and readily available
Biofuels– demand for renewable energy is growing – EU energy directives – demand for biofuels and biomass
ENERGY AND PULPFavourable long-term market outlook
ENERGY AND PULPContents
Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions
ENERGYLow-cost, low emission electricity generation
27 %
32 %
30 %
11 %
Hydro Nuclear
CHP (Paper) Thermal
Total electricity generation 14.2 TWh in 2008
Cost competitive electricity generation regardless of fuel and CO2 prices– hydro, nuclear, biofuels-based CHP
Electricity self-sufficiency 85% in 2008– net purchases 2.5TWh– net seller in Finland (2.5TWh)
62% of fuels used by UPM globally were biofuels in 2008– 81% in Finland
Ongoing investment – TVO's new reactor will add 3.5TWh of
nuclear power, starting in 2012
0
200
400
600
800
1 000
DEI
Nuon
RWE
Drax
CEZ
Scott
ish &
South
ern
Union
Feno
saEn
desa Enel
EDP
Vatte
nfall
Dong
E.ON
Electr
abel
Iberdr
ola EDF
Britis
h Ene
rgyVe
rbund
UPM
Fortu
mSta
tkraft
ENERGYLow CO2 emission electricity sources
Source: PWC 2008, UPM
kgCO2/MWh Carbon factor – CO2 emissions per electricity unit
European average carbon factor373 kg of CO2/MWh
107
ENERGYUPM intends to grow further in emission-free electricity
UPM invests in CO2-free electricity generation to grow in electricity business– investments– joint ventures– acquisitions
After the start-up of TVO's OL3 in 2012 UPM's capacity grows by 468 MW (18%)
UPM wants to participate and grow in CO2-free electricity market also in the future – TVO's OL4 application to build a new
nuclear power unit
ENERGY AND PULPContents
Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions
300
400
500
600
700
800
900
1 000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09
PIX NBSK PIX BHKP
PULP Chemical pulp market prices
USD/ton
(Northern Bleached Softwood Kraft)
Source: FOEX Indexes Ltd.
(Northern Bleached Hardwood Kraft)
25
200
250
300
350
400
450
500
550
0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000
Cumulative capacity, 1000 t/a
Delivered cash costs to Frankfurt, EUR/t
World softwoodmarket pulp
PULP At current market prices over half of world market pulp capacity operates on negative EBITDA
World hardwoodmarket pulp
UPMMetsä-Botnia
Best European
Best European
Source: Pöyry estimate Q4/2008
Price
Price
80
100
120
140
160
2005 Ap
r Jul
Oct
2006 Ap
r Jul
Oct
2007 Ap
r Jul
Oct
2008 Ap
r Jul
Oct
2009 Ap
r Jul
Oct
NBSK (EUR) Pine pulpwood BHKP (EUR) Birch pulpwood
PULP Operating in the economic downturn: pulp prices have fallen while wood costs are still high in Finland
Jan 2005 = 100
Source: Metla, Board of Customs Wood prices delayed by six months
Operating profit turned into losses due to lower pulp price and deliveriesWood cost remained highWood and pulp inventory write downs of € 38 million in Q1 2009
-100
-80
-60
-40
-20
0
20
40
60
80
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
57-55EBITDA
n.a.-23%Average price, change
-33%
-93
139
Q1 2009
n.a.Deliveries, change
67Operating profit M€excl. special items
269Sales, M€
Q1 2008
Pulp
Associated company Metsä-Botnia
€, millionPulp
Operating profit excluding special items
PULPOperating in the economic downturn
Wood and pulp inventory write down
InvestmentsBotnia's 1 million tonne pulp mill in Uruguay– Started in November 2007
Evaluating new ventures, e.g. Borea J/V in Russia– Shareholders' agreement in 2008– Investment decisions are subject to the results of the final
feasibility study and necessary approvals from relevant authorities
ClosuresIn Q4 2008, UPM closed its least competitive pulp mill– Tervasaari 210,000 tonnes
In March 2009 Botnia closed its least competitive pulp mill– Kaskinen 450,000 tonnes, UPM's share 212,000 tonnes
PULP Increasing the share of low-cost pulp
ENERGY AND PULPContents
Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions
UPM's wood consumption was 24.8 million m³ in 2008– paper, pulp and plywood mills, sawmills and bioenergy plants– supplied forest biomass equivalent to 3.4 GWh of energy
Forests– UPM owns 1 million hectares of forest land– supplies 10% of UPM's wood consumption– other forests under management 0.7 million hectares
Sawmilling has an important role in biomass sourcing– annual capacity for sawn timber 2.4 million m³
Forest biomass value chain is important in bioenergy
FOREST AND TIMBERForest biomass sourcing and sawmilling
10
12
14
16
18
20
22
24
26
2004 Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009
Spruce Pine Birch
35
40
45
50
55
60
65
70
75
2004 Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009
Spruce Pine Birch
FOREST AND TIMBERWood prices in Finland returning to 2005 levels
€ / m³ Log prices € / m³ Fibre wood prices
Source: Metla
60
80
100
120
140
160
180
2005 Ap
r Jul
Oct
2006 Ap
r Jul
Oct
2007 Ap
r Jul
Oct
2008 Ap
r Jul
Oct
2009 Ap
r Jul
Oct
Whitewood timber Spruce logs Redwood timber Pine logs
FOREST AND TIMBER Operating in the economic downturn: sawn timber prices have fallen while log costs are still high
Jan 2005 = 100
Source: Metla, Board of Customs Wood prices delayed by six months
-60
-40
-20
0
20
40
60
80
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
4-15EBITDA
-37%
-21%
-8
385
Q12009
n.a.Sawn timber deliveries, change
n.a.Average price of sawn timber, change
26Operating profit M€excl. special items
508Sales, M€
Q1 2008
Forest and timber
Operating losses mainly due to lower price and deliveries of sawn timberCost of logs remained at a high levelFair value of biological assets increased less than a year ago
Fair value change of biological assets
€, millionForest and timber
Operating profit excluding special items
FOREST AND TIMBEROperating in the economic downturn
Wood inventory write down
ENERGY AND PULPContents
Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions
UPM's biofuel development utilises synergies within the pulp and paper value chain, instead of competing with food value chain
2nd generation biofuels– high quality and lowering impact on CO2 emissions throughout the
value chain
EU directive– biofuels 10% of all transportation fuels by 2020– 2nd generation biofuels counted with 2x weight
UPM is piloting concepts for biodiesel, bioethanol and bio-oil– Technical requirements for investment decisions in place by the end
of 2009
BIOFUELS UPM's biofuel development
ENERGY AND PULPContents
Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions
Low-cost, low emission electricity generation
Competitive pulp mill assets
Investment requirements in the current assets are low
Current business environment is challenging– pulp and sawn timber prices have fallen and demand is low– wood costs to decline in 2H09
Favourable long-term market outlook– growth opportunities in electricity, pulp and biofuels
ENERGY AND PULP Conclusions
PAPER
Jyrki OvaskaPresident
May 26, 2009
Operating in the low-demand environmentConclusions
Paper Business GroupStructural advantage and cost leadership
Publication papers (magazine papers and newsprint) and fine and speciality papers
Customers are publishers, printers, merchants and paper converters
19 paper mills in Europe, China and the US, sales representation in 55 countries
Paper includes the mechanical and deinked pulp production and the combined heat and power (CHP) plants operating on paper mill sites (1/3 of UPM’s total power generation)
Combined annual paper production capacity ~11.5 million tonnes
PAPER Paper Business Group
Paper52%
UPM's capital employed € 11.2 billion
Paper49%
UPM's operating profit € 513 million
(excl. special items)
Paper72%
UPM's sales €9,461 million
PAPERStrategy – Paper
DEVELOPMENT AND GROWTH:
Consolidation in Europe
Proactive response to paper end-use
developments
Growth in China and other emerging
markets
IMPROVED COST BASE:
Close uncompetitive capacity
Improve operating efficiency
Effective supply chain management
Lean investments
TARGET:
European profitability
Growth in new markets
Paper is well positioned and ready to benefit from industry consolidation in Europe
Paper Business Group
Operating in the low-demand environmentStructural advantage and cost leadership
Conclusions
100
200
300
400
051015202530
WEAK
STRONG
- Technical age, years -
- Weighted averagePM capacity, 1 000 t/a -
UPM
Stora Enso
Sappi
IP
Norske Skog
Domtar
Nippon
Oji
AbitibiBowater
APP
Including newsprint, MFS, SC, CWC, std. CWF, std. UWF
100
200
300
400
051015202530
WEAK
STRONG
- Technical age, years -
- Weighted averagePM capacity, 1 000 t/a -
Stora Enso
M-real Myllykoski
SappiNorske Skog
Burgo
Mondi
SCAHolmen
NOTE: Currently idled Nordland PM2 is excluded from the analysis
UPM
PAPERUPM has modern well invested assets with limited investment needs
Source: Pöyry
Printing papers - EuropePrinting papers - Global
PAPER Effective supply chain management
Uniform modus operandi
Management by supply chain KPIs (key performance indicators)
Higher efficiency in order-to-deliveryprocess
Cost savings in working capital
Maintaining good level of service
PAPERCost inflation is easing up
Chemical pulp pricing is significantly coming down
RCP prices are declining
Wood cost will remain high through Q2 and then reduce
Electricity prices are declining, but with a long time delay
Oil based chemicals and logistics cost
Temporary layoffs
Fixed costs are expected to be lower
Fibre costs29 %
Other variable
costs12 %
Fixed costs19 %
Energy costs15 %
Capital charges
15 %
Delivery costs10 %
European graphic papers producers
Average cost structure
Source: Pöyry
0
20
40
60
80
100
2000 2002 2004 2006 2008
Recycled fibre (deinked pulp)Mechanical pulpChemical pulp
Optimisation of diversified fibre portfolio
– Hardwood pulp – net buyer incl. Botnia
– Softwood pulp – net seller incl. Botnia
– Mechanical pulp – integrated into paper production
– RCP – procurement to be involved in the value chain
PAPEROptimization of diversified fibre base has improved the cost structure
Fibres used in UPM's paper production, %
Diversified fibre portfolio enables development of different fiber mixes
Paper Business Group
Operating in the economic downturnStructural advantage and cost leadership
Conclusions
-9,0
-7,4
-5,9
-4,3
-2,8
-1,2
0,3
1,9
3,4
5,0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-25
-20
-15
-10
-5
0
5
10
15
20
PAPERWeaker economic growth affects demand for European graphic paper demand
Paper demand growth (%, trailing 3 month)
Sources: Cepiprint, Cepifine, OECD
Euro zone composite leading indicator
Graphic paper demand growth
Euro zone composite leading indicator
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2001
2002
2003
2004
2005
2006
2007
2008
e
2009
e
2010
e
2011
e
Total advertising expenditure growth, %
Source: Zenith Optimedia March 2009
PAPERGrowth of advertising expenditure – recovery is forecasted from 2010
Print media advertising growth by region (excl. direct mail), %
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2001
2002
2003
2004
2005
2006
2007
2008
e
2009
e
2010
e
2011
e
North America
AsiaEurope Asia
Europe
North America
Forecast Forecast
PAPERDevelopment of ad-spend last 10 years – change in role of print media vs. the Internet
15 24 24 24
4451 51 46
46
55 58 612
6 921
127
163169
181
0
50
100
150
200
1998 2000 2004 2008
20 22 21 21
35 41 38 41
3138 45
550
1 3
17
97
115123
154
0
50
100
150
200
1998 2000 2004 2008
US$, billion US$, billion US$, billion
NORTH AMERICA EUROPE ASIA PACIFIC
Source: Zenith Optimedia Advertising spend in current dollars – March 2009
5 6 6 720 23 25 26
27 3035 410
13
1262
7081
103
0
50
100
150
200
1998 2000 2004 2008
Total
Other
Internet
TV
News
Maga
PAPERRegional paper demand by end-use 2008
Books & Directories
Magazines Catalogues
Direct marketing
Business forms &
Envelopes
Cut sizeNewspapers
EuropeNorth America
Newspapers
Books & Directories
Magazines
CataloguesDirect marketing
Business forms &
Envelopes
Cut size
Source: CEPI, GAPTRACK, UPM
PAPERCustomers have a choice:different paper grades for the same end-use
WFU
WFC
LWC
SC
MFS
Newsprint
Copy paperBusinessforms +
Envelopes
Direct marketingCataloguesMagazines
Book/DirectoriesNewspaper
Consumer papersAdvertising materialPublishing
Source: UPM5 – 10% 11 – 30% 31 – 50% over 50%3% and below
Paper grade's share of total end-use consumption
End-use
Grade
PAPERUPM is prepared to cope with the lower demand environment in Europe
Improved cost competitiveness – lower fixed costs due to less machines and improved operational
efficiency of large and cost competitive production units– closed 2.1 million tonnes of paper making capacity– restructuring, streamlining and targeted investments– achieved better product and market mix– optimisation of diversified fibre base
Effective supply chain management– reduction of working capital– improved internal efficiency
PAPERPaper – operating in the economic downturn
Sales declined by 22%Higher prices maintainedSignificant reduction in fixed costs through restructuring and flexible way of workingLower pulp costs compensated for the increase in energy costs
EBITDA margin increased to 13.7% (11.8%)
-4%-1%-22%Sales growth, %
10,6412,7532,028Paper deliveries, 1,000 t
885209187EBITDA, M€
0%
50
11.8
1,773
Q1 2008
12,613.7EBITDA, % of sales
-26%
37
1,367
Q1 2009
-7%Paper deliveries, % change
250Operating profit, M€excl. special items
7,011Sales, M€
2008Paper
Paper Business GroupBusiness environmentStructural advantage and cost leadershipConclusions
Conclusions
Focus in market driven operations– flexibility with good customer service and wide range of graphic
papers – customer segmentation for good targeting
Cost competitiveness is # 1 priority– cost leadership by optimising resources and production– tight investment policy– new ways of operating to leverage competitive advantages
UPM is well positioned– focus to grow in the new markets (China, Eastern Europe, Russia)– readiness to benefit from industry restructuring in Europe
© UPM 58
ENGINEERED MATERIALS
Jussi VanhanenPresident
May 26, 2009
Contents
Engineered Materials Business GroupLabelPlywoodNew businessesConclusions
Label Self-adhesive label materials for product labelling andvariable information printing
Plywood Technical birch and spruce products for construction andindustrial end-uses
RFID RFID tags and inlays for information or data management
Wood plastic composites for outdoor constructions
ENGINEERED MATERIALS Businesses in the Business Group
UPM's capital employed € 11.2 billion
UPM's operating profit € 513 million
(excl. special items)
UPM's sales €9,461 million
ENGINEERED MATERIALSWhat is common between the businesses?
Higher added value businesses with growth potential– Growing end-uses, UPM's market share
Businesses with opportunity for renewal– New end-use areas
In-house know-how and development plays a significant role
There are some synergy advantages but– each business is operated independently and– the development potential of each business is maximised
Source: FINAT, TLMI and UPM Raflatac estimates.Pie size indicates the current market size in m².
ENGINEERED MATERIALSTwo global companies in the labelstock business
UPM RaflatacAvery Dennison
Other main competitorOther competitors
ENGINEERED MATERIALS UPM clear market leader in the plywood business
0 200 400 600 800 1000 1200
Vänerply
Ilim-Bratsk
Fanerny Komi
Sonae
Fankom
Syktyvkar
Latvijas Finieris
Sveza
Metsäliitto
UPM
1000 m3
STK 9.2.2009 Sources: finnforest.com, latvijas.lv, plysorol.fr, pyrabelisk.com, sveza.com, vanerply.se
ENGINEERED MATERIALS UPM Raflatac market leader in RFID business Indexed inlay turnover in 2008
0
20
40
60
80
100
120
UPM Raflatac Avery DennisonRFID*
Alien* Tagsys* KSW*
UPM Raflatac turnover = 100
Source: UPM Raflatac estimates* Estimated inlay turnover
Engineered Materials Business GroupLabelPlywoodNew businessesConclusions
ENGINEERED MATERIALSLabel – operating in the economic downturn
Sales declined by 10-20% depending on the region
Prices increased by 9%, which fully compensated higher raw material costs
Reduction in fixed costs even before restructuring benefits materializing
The start-up of new factory in Wroclaw successful
3-3Operating profit, M€excl. special items
n.a.+9%Average price, change
n.a.-10-20%Deliveries, change
116EBITDA, M€
4.5
242
Q1 2008
2.7EBITDA, % of sales
223
Q1 2009
Sales, M€
Label
ENGINEERED MATERIALS Labelstock consumption is driven by consumer demand and shipping activity
Foodlabelling
Beveragelabelling
Personal Care labelling
Home Carelabelling
Retail, Logistics & Transport labelling
Current topics– Consumer demand has slowed down due to economic downturn– Pricing discipline– Completed investments and restructuring actions have secured a
competitive asset base
ENGINEERED MATERIALSStrategy – Label
IMPROVED COST BASE:
Restructuring theEuropean operations
IMPROVED ASSET BASE:
Changshu, China2006
Dixon, USA2008
Wroclaw, Poland2008
TARGET:
Cost leadership
Profitable growththrough new productand service launches
Label as a cost competitive growth business
Engineered Materials Business GroupLabelPlywoodNew businessesConclusions
ENGINEERED MATERIALS Plywood – operating in the economic downturn
Operating profit declined due to significantly lower delivery volumes and lower pricesWood costs remained at a high level – write down takenExtensive production downtime was taken at all mills
-30
-20
-10
0
10
20
30
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
26-23EBITDA
n.a.-11%Average price of plywood, change
-42%
-28
75
Q1 2009
n.a.Plywood deliveries, change
21Operating profit M€excl. special items
157Sales, M€
Q1 2008
€, million Operating profit excluding special items
Wood inventory write down
ENGINEERED MATERIALS Plywood demand driven by construction and transportation industry activity
Current topics– Strong deceleration in construction and transportation– Capacity management – Cost cutting in general
Construction Transportation Furniture industry
Engineered Materials Business GroupLabelPlywoodNew businessesConclusions
ENGINEERED MATERIALS New businesses: in-house know-how forms the basis for further business development
RFID– Basis of development: joint customer base with
labelstock business and material know-how– UPM has a strong position as a reliable, long-term
supplier of RFID tags and inlays– Current focus: make full use of Chinese factory
and widen product portfolio
UPM ProFi– Wood plastic composite materials made from
waste deriving from UPM Raflatac value chain– Current focus: extension of distribution reach and
ramping up new German factory– Exploring new end-uses for the material
Engineered Materials Business GroupLabelPlywoodNew businessesConclusions
Conclusions
Secure the profitability in an environment of strong but temporary slowdown of demand, without risking future opportunities
Seek ways to utilize the economic slowdown for improving our long-term prospects
Profitable growth through new product and service launches
New, synergetic and significant business opportunities
Favourable long-term market outlook
FINANCIALS
Jyrki SaloCFO
May 26, 2009
FINANCIALSEBITDA development in Q1 2009
0
50
100
150
200
250
300
350
400
450
500
EBITDAQ108
EBITDAQ109
€ million
337
128
Prices, currency
Deliveries
Wood costs Energy
costs Otheritems
Fixed costs
Wood and pulp inventory write-down
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109
Publication papers Fine and speciality papers Sawn timber Plywood
FINANCIALSUPM's production has been curtailed to respond to changes in demand
Delivery change from previous year (%)
-26%-27%
-37%-42%
FINANCIALSCost deflation materialising with a delay
Cost breakdowntotal €8.4bn in 2008
Energy 11%
Fibre 28%
Delivery 10%
Chemicals 13%
Personnel 17%
Other 15%
Fixed costs– permanent savings– temporary lay-offs
Fibre costs– wood– RCP– purchased pulp
Energy costs
Oil-based chemicals and logistics costs
Other raw materials
6%
10
11
12
13
14
15
16
17
18
19
20
2004 2005 2006 2007 2008 2009
FINANCIALSWood prices in Finland returning to 2005 levels – 2009 still burdened by high wood costs
Fibre wood prices in Finland, € / m³
Source: Metla
UPM's wood costs expected to decrease with a
delay
Birch
Pine
6 month averagedelayed by 6 months
210
14
196
-78
274
-73
216
131
128
Q1 2009
-121
4
-125
-175
50
-99
-106
255
337
Q1 2008
70Cash flow after capex
-292Finance costs and income taxes
-558Capital expenditure
26Asset sales and acquisitions
96Cash flow after investing activities
-132Change in working capital
628Net cash from operating activities
1,052Cash flow before change in working capital
1,206EBITDA
2008€, million
FINANCIALSCash flow
FINANCIALS Cash flow and actions to preserve cash
-750
-500
-250
0
250
500
750
1 000
1 250
Q104
Q204
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
€ million, trailing 12 months
WOC reduction
Dividend cutCapex cut
Net cash flow from operations
Cash flow after investing activities
Cash flow improvement from:
0
200
400
600
800
1000
04 05 06 07 08 09e
FINANCIALS Capital expenditure 2009 estimate € 300 million
€ million
Depreciation excl. amortization of goodwill
Strategic investments
Operational investments
551
300
Estimate
Q1 2009 capital expenditure was € 67 million
0200400600800
1 0001 2001 4001 6001 8002 000
Res
t of
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-202
6
2027
2028
2029
2030
Committed Facilities Loans
Liquidity on 31 March 2009 was € 1.7bnIn March, the € 1.5bn loan facility maturing in 2010 was replaced by a new three-year € 825m facility
FINANCIALSMaturity profile – moderate repayments for the next three years
€ million
FINANCIALSConclusions
# 1 Priority: cash preservation and profitability
Cost deflation materialising with a delay
Solid balance sheet and good liquidity
Balance demand and supply with temporary lay-offs
Recommended