UPM's Q4 net income down 29.2% year-over-year to €102M influenced by restructuring charges, other finance costs; net sales up 14% to €2.69B primarily on Myllykoski acquisition, sales price increases, particularly in paper

HELSINKI , February 1, 2012 (press release) – Financial Statements 2011:

October–December 2011:

Earnings per share excluding special items were EUR 0.16 (0.27), and reported EUR 0.20 (0.28)
EBITDA was EUR 301 million, 11.2% of sales (318 million, 13.5% of sales)
Delivery volumes decreased and variable costs remained high
Operating cash flow continued to be strong at EUR 310 million

January–December 2011:

Earnings per share excluding special items were EUR 0.93 (0.99), and reported EUR 0.88 (1.08)
EBITDA was EUR 1,383 million, 13.7% of sales (1,343 million, 15.0% of sales)
Solid cash flow ensured strong balance sheet after the Myllykoski acquisition
Board’s proposal for dividend per share EUR 0.60 (0.55)

Key figures Q4/2011 Q4/2010 Q1–Q4/2011 Q1–Q4/2010
Sales, EURm 2,686 2,357 10,068 8,924
EBITDA, EURm 1) 301 318 1,383 1,343
% of sales 11.2 13.5 13.7 15.0
Operating profit (loss), EURm 131 207 459 755
excluding special items, EURm 147 212 682 731
% of sales 5.5 9.0 6.8 8.2
Profit (loss) before tax, EURm 94 173 417 635
excluding special items, EURm 110 178 572 611
Net profit (loss) for the period, EURm 102 144 457 561
Earnings per share, EUR 0.20 0.28 0.88 1.08
excluding special items, EUR 0.16 0.27 0.93 0.99
Operating cash flow per share, EUR 0.59 0.66 1.99 1.89
Shareholders’ equity per share at end of period, EUR 14.22 13.64 14.22 13.64
Gearing ratio at end of period, % 48 46 48 46
Net interest-bearing liabilities at end of period, EURm 3,592 3,286 3,592 3,286


Jussi Pesonen, President and CEO, comments the year:

“During 2011 our EBITDA and operating cash flow improved on 2010 and our strong financial position continued.

Prices of all production inputs increased substantially compared to 2010 but we succeeded in raising prices to cover the cost increases.

However, during the latter part of the year the deterioration of pulp prices and lower demand for paper and wood products had a clear impact on our profitability. In the label market the weak demand was evident in Europe but solid development continued in other markets.

Demand weakened during the fourth quarter, but we were able to maintain stable sales prices in most businesses with the exception of Pulp and Timber. Raw material market prices started to decline towards the end of the year, but our variable costs still remained on a high level during the last quarter of 2011.

The major strategic signpost in 2011 was the Myllykoski acquisition. The transaction, the integration and the restructuring have all proceeded in line with our plans. The consolidation and the consequent restructuring have improved our cost position on the paper markets. Also, our customer offering in paper has been enhanced. Targeted synergy benefits are well on the way to being successfully implemented and this will start to be visible as of the first quarter of 2012.

Although our markets have been affected by the uncertainties in the world economy, UPM’s outlook into the first half of 2012 is fairly stable. We are in a good position to proceed with the next steps in our Biofore strategy,” says Pesonen.

Results

Q4 of 2011 compared with Q4 of 2010

Sales for the fourth quarter of 2011 were EUR 2,686 million, 14% higher than the EUR 2,357 million in the fourth quarter of 2010. Sales increased mainly due to the inclusion of the acquired Myllykoski Corporation and Rhein Papier GmbH, as of 1 Au- gust 2011. In addition, sales prices increased, particularly in Paper.

EBITDA decreased to EUR 301 million, 11.2% of sales, from EUR 318 million, 13.5% of sales in the same period last year.

Sales prices increased in Paper, Label and Plywood, but decreased in Pulp, sawn timber and Energy. Higher sales prices improved EBITDA by approximately EUR 68 million. This was not enough to fully offset the noticeably higher variable costs. Energy and fibre costs were close to the same level as in the comparison period, but many other variable costs, such as chem- icals and coating materials, were clearly higher.

Delivery volumes decreased from last year in most of UPM’s businesses on a comparable basis, excluding the impact of the acquired Myllykoski Corporation and Rhein Papier.
Fixed costs were approximately EUR 9 million higher than last year, excluding the impact of the acquisition of Myllykoski Corporation and Rhein Papier.

Operating profit was EUR 131 million, 4.9% of sales (207 million, 8.8% of sales). Operating profit includes net charges of EUR 16 million as special items, mainly related to restructuring measures in Paper.

The operating profit excluding special items was EUR 147 million, 5.5% of sales (212 million, 9.0% of sales).

The increase in the fair value of biological assets net of wood harvested was EUR 49 million compared with EUR 85 million a year before.

The share of results of associated companies and joint ven- tures was EUR -2 million (-1 million).

Profit before tax was EUR 94 million (173 million), and excluding special items it was EUR 110 million (178 million). Interest and other finance costs net were EUR 29 million (36 million). Exchange rate and fair value gains and losses resulted into a loss of EUR 13 million (gain of EUR 2 million).

Income taxes were EUR 8 million positive (29 million nega- tive). The impact on taxes from special items was EUR 33 mil- lion positive (9 million positive). This also includes a EUR 30 million decrease in deferred tax liabilities relating to the change in corporate tax rate in Finland.

Profit for the fourth quarter was EUR 102 million (144 mil- lion) and earnings per share were EUR 0.20 (0.28). Earnings per share excluding special items were EUR 0.16 (0.27).

Outlook for 2012

Global economic growth is expected to continue in 2012. In Europe, however, the on-going sovereign debt crisis introduces uncertainty to the economic outlook. Economists estimate that the Euro zone will experience a mild recession in the early part of 2012.

In UPM’s businesses, market conditions are estimated to have stabilised. While the second half of 2011 was characterised by weakening demand, the demand and price outlook for UPM’s products is broadly stable for early 2012 compared with late 2011, taking into account seasonal variations.

Costs are expected to decrease in the early part of 2012 from the fourth quarter of 2011. Raw material market prices started to decrease during the fourth quarter and this is expected to result into slightly lower variable costs in the first quarter of 2012 compared with the fourth quarter of 2011.

Operating profit in the first half of 2012, excluding special items, is expected to be at around the same level as in second half of 2011.

Capital expenditure for 2012 is forecast to be around EUR 350 million.


Dividend for 2011

The Board of Directors will propose to the Annual General Meeting, to be held on 30 March 2012 that a dividend of EUR 0.60 per share be paid in respect of the 2011 financial year (EUR 0.55). It is proposed that the dividend be paid on 13 April 2012.

Financial information in 2012

The Annual Report for 2011 will be published on the company’s website www.upm.com on 23 February 2012. The printed Annual Report will be available in the week starting on 12 March 2012. The Interim Reports will be published as follows:

Interim Report January–March 2012 on 26 April 2012
Interim Report January–June 2012 on 7 August 2012
Interim Report January–September 2012 on 25 October 2012

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