UPM-Kymmene's CEO Discusses Q1 2013 Results - Earnings Call Transcript
UPM-Kymmene Corporation (UPMKF.PK) Q1 2013 Earnings Call April 25, 2013 6:15 AM ET
Jussi Pesonen
Ladies and gentlemen, welcome to UPM’s first quarter 2013 result webcast. My name is Jussi Pesonen and I’m the CEO of UPM-Kymmene. I’m here with our CFO, Tapio Korpeinen.
Tapio Korpeinen
Good afternoon, everyone.
Jussi Pesonen
Let’s then move to the highlights of the first quarter this year. Q1 was well in line with our expectations. Our results were underpinned by continued good performance in our growth businesses. Pulp improved its profits as we had a normal clean run in the quarter in terms of production, and of course, the sales were solid as well.
In Energy, our profits continued to be on a good level, even though the hydro volumes normalized, and Label continued with stable performance. While it’s positive that in plywood and timber we achieved some improvements with our own measures, even though there was little improvement in the Wood products markets, our prices are up on both areas.
In Paper, the market situation was just as challenging as we expected and explained. Publication paper prices decreased in Europe during the Q1 currencies and current development was against us, and paper demand continued to decrease in Europe as we were guiding earlier this year. As a result of the EBITDA, the Paper business decreased significantly and operating profit was just about breakeven.
Of course, it is a pleasure to also comment that our fixed costs were down from that of last year. We have been able to save our fixed cost over EUR30 million, understanding that that couldn’t offset the result decline, especially in paper.
And now, we are in the situation where the challenges are, as we all know, we are fast implementing the cost-saving plan that we announced 17th of January. We are targeting future annual fixed cost savings of EUR90 million, and that benefit will start to materialize in the second half of this year. But I will come back to that.
Next page I would skip and then move to the kind of economic outlook, page 4, so exactly this two-speed world where we are living in. In Europe, the economy continues to be contract and negative for most of the businesses. In our case, it is posting additional challenges for the European graphic paper business, in particular.
In the US, positive GDP growth continues, but still on a low level. Only in the emerging markets the economy growth continues to be relatively solid, as we can see here, and that is visible also in our business in China, especially.
Moving to the deliveries and delivery volumes. This is a good picture to elaborate the kind of situation where we have and this is backdated up until 2008, and so we see the big drop in 2009 and the recession. Of course, these macro realities are affecting the demand for our products as well.
As you can see from this page that the most visible, it is in our publication paper deliveries, which decreased by 6% to 7% from last year. The decrease in deliveries from Q4 was 17%, which is of course probably a normal seasonal pattern for us. It has been typically on the level of 15% on average.
In Pulp, we had the normal clean quarter in terms of production and this was visible in our pulp deliveries as well as profits in the pulp business. We were able to generate more than EUR140 million of EBITDA and a good EBIT margin as well.
You may recall that in the latter part of last year, we had some production problems on top of the normal maintenance and downsize [ph] we had. So this was certainly run for a change.
In Plywood, as they speak themselves, we have been successful to actually, in our commercial strategy focusing on key customers, and especially what is visible here is that we have been able to sell our products outside of Europe, which has been our activity using the UPM platform to sell products also outside of Europe. European economy doesn’t support that kind of increase in plywood, as to kind of seen here.
