UPM reports solid second quarter results

The Finnish company – which has a range of interests including ownership of the newsprint mill and materials recycling facility at Shotton, North Wales, through to a new nuclear power plant being built in Finland -today (August 3)reported an increase in sales for the first half of 2011 despite a challenging financial environment.

The figures published today (August 3) for April-June 2011 come just days after UPMs acquisition of the Myllykoski paper business which UPM said gives it a unique momentum for profitability improvement.

The Myllykoski deal includes Rhein Papier GmbH and consists of seven publication paper mills in Germany, Finland and the United States. Their total annual paper production capacity is put at 2.8 million tonnes.

In its statement, UPM pointed to higher used newspaper costs in its feedstock but said that it had got through a 2% price increase to newsprint buyers.

Jussi Pesonen, president and CEO, said: Market demand seems to have stabilised and cost development is levelling off. In these conditions the best way to make fundamental improvements in terms of profitability is through determined consolidation and restructuring. The Myllykoski acquisition gives UPM a unique momentum for profitability improvement. Already during the initial integration planning the merits of the transaction have been confirmed.

He continued: Although the transaction is an important step towards creating value in UPMs Paper Business, it does not serve as a solution for all of the challenges faced by the industrys players. Within a year we have succeeded in reducing our net debt by EUR 675 million. It is testimony of a strong and solid operative cash flow. Our financial flexibility for further strategic manoeuvres is good and we intend to continue implementing strategic steps in our various businesses.

Outlook for 2011

In its paper activities, looking ahead for the rest of 2011, the company said that chemical pulp deliveries in the second half of 2011 are expected to increase slightly from the same period last year.

It noted that in Europe, some seasonal demand increase is expected for publication papers in the second half of 2011, while in ne papers, demand is expected to continue weak.

Solid demand is expected to continue in Asia. UPM has increased prices for newsprint and magazine papers in Europe by approximately 2% in the beginning of the third quarter from the second quarter.

It added: On average, UPMs ne and speciality paper prices are expected to remain about the same in the third quarter as in the second quarter. Label materials deliveries in the second half of 2011 are expected to increase slightly from last year.