UPM-Kymmene Corporation Financial Review Jussi Pesonen, President and CEO February 1, 2005

Transcription

1 UPM-Kymmene Corporation Financial Review 2004 Jussi Pesonen, President and CEO February 1, 2005

2 Year 2004 in a nutshell Good growth in paper demand - record paper deliveries Record paper deliveries (million tons) 10.8 ( ) Weak operating profit - improved by cost savings and non-recurring items Operating profit (EUR million) 639 ( ) Earnings per share 1.83 includes 1.31 non-recurring income Profitability began to recover (2H/04 vs. 2H/03) UPM 2

3 Contents Business drivers Financials Q Financials 2004 Current topics Outlook for 2005 UPM 3

4 BUSINESS DRIVERS

5 Business drivers - Paper demand has increased Annual change in paper demand Europe North America 15% 15% 10% 10% 5% 5% 0% % % -5% -10% -10% -15% -15% Newsprint + UMI Coated fine Coated magazine Uncoated fine Newsprint + UMI Coated fine Coated magazine Uncoated fine Source: Cepiprint, Cepifine, PPPC, UPM estimates UPM 5

6 Business drivers Paper demand UPM's total paper deliveries year-on-year Magazine papers % (* +4% +2% Change y-o-y, % '000 tons Newsprint Change y-o-y, % '000 tons % (* +5% +5% 500 Fine and speciality papers Change y-o-y, % '000 tons % +4% +7% (* Magazine and newsprint 2002 vs excl. additional tonnage from Haindl acquisition IQ IIQ IIIQ IVQ IQ IIQ IIIQ IVQ IQ IIQ IIIQ IVQ UPM '02 '03 '04 6

7 Business drivers - Demand and capacity development Estimate* Europe N. America Asia 91% 92% 94% 92% 93% 93% 91% 91% 92% Capacity change Demand change '000 tons '04/'03 '05/'04 '06/'05 '04/'03 '05/'04 '06/'05 '04/'03 '05/'04 '06/'05 Sources: Cepiprint/fine, PPPC, EMGE, Risi preliminary figures *) Newsprint, Magazine papers, Fine papers UPM 7

8 Business drivers- Advertising development 1 (2) Advertising pages and direct mail development Consumer Magazines Advertising Pages y-t-d change, % Newspapers Advertising Pages y-t-d change, % Direct Mail Items y-t-d change, % % +6% +0% +3% +4% Germany UK France USA % +4% Germany* UK* France % +11% +2% Germany UK USA *Germany and UK excl. classified ads Sources: PIB, VZD, Nielsen, Secodip, Brad'n Rate, Direct Mail Information Service, Deutsche Post, UPM UPM 8

9 Business drivers- Advertising development 2 (2) Consumer magazine advertising pages in the U.S. BASE DATA: 200 consumer magazines % Change from previous year 20 Dec 2004 up 10,4 % from Dec Dec 04 Nov 04 Oct 04 Sept 04 Aug 04 Jul 04 Jun 04 May 04 Apr 04 March 04 Feb 04 Jan 04 Dec 03 Nov 03 Oct 03 Sep 03 Aug 03 Jul 03 Jun 03 May 03 Apr 03 March 03 Feb 03 Jan 03 Dec 02 Nov 02 Oct 02 Sep 02 Aug 02 Jul 02 Jun 02 May 02 Apr 02 March 02 Feb 02 Jan 02 Year to date consumer advertising pages up 3,8% from previous year Source: PIB/UPM UPM 9

10 Business drivers- EUR/USD exchange rate Monthly rates 1,40 1,35 1,30 1,25 1,20 1,15 1,10 1,05 1,00 0,95 0,90 0,85 0,80 0,75 0, % % Source: Bank of Finland % +1.7% % +5.9% EUR/USD Average exchange rate Quarter-on-quarter changes % +5.8% +5.2% -3.7% +1.5% / % % UPM

11 Business drivers- Paper price development in Europe Euro / ton Average paper price change Q4 '04 vs. Q4 '03 = -3% News 45 g/m² SC rg 56 g/m² LWC off 60 g/m² WFCr 100 g/m² WFUr 80 g/m² Source: PPI UPM 11

12 Business drivers- Paper price development in USA USD /mt. ton Average paper price change Q4 '04 vs. In US dollars Q4 '03 = +10% In euros Q4 '03 = +1% News 48,8 g/m² SC 51,8 g/m² LWC 59,2 g/m² WFCr 88,8 g/m² WFUr off 74 g/m² Source: RISI UPM 12

13 Business drivers- Global chemical market pulp price USD/t Northern Bleached Softwood Kraft USD 628 Northern Bleached Hardwood Kraft USD 537 Source: FFIF UPM 13

14 Business drivers- Recycled paper price 200 Euro/tons in Germany Source:EUWID UPM 14

15 FINANCIALS Q4 2004

16 Quarterly summary excl. non-recurring items EUR, million IV/04 III/04 II/04 I/04 IV/03 III/03 II/03 I/03 Sales 2,423 2,449 2,497 2,451 2,511 2,400 2,453 2,423 Operating profit Earnings per share, EUR Deliveries, 1000 t 2,814 2,663 2,681 2,634 2,811 2,576 2,571 2,384 UPM 16

17 Operating profit margin excl. non-recurring items and operating rates by quarter % 20 FAS IFRS 95 % % I/01 I/02 I/03 I/04 82 UPM 17

18 Operating profit margin by division 1 (2) Excl. amortization of goodwill and non-recurring items Magazine Papers % ,1 5,9 Newsprint 5 4,2 1,8 Fine and Speciality Papers 0-0,3 1,1-5 I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 UPM 18

19 Operating profit margin by division 2 (2) Excl. amortization of goodwill and non-recurring items % 8 6 4,5 Converting 4 Wood Products 2 0 1,5 0,6-2 -0,5 I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 UPM 19

20 FINANCIALS YEAR 2004

21 Sales EUR million FAS IFRS 9, UPM 22

22 Operating profit Incl. non-recurring items Excl. non-recurring items EUR, million FAS IFRS (excl.) UPM 23

23 Operating profit by division excl. non-recurring items EUR, million Magazine Papers Newsprint Fine and Speciality Papers Converting Wood Products Other Operations Forestry department, Finland Energy department, Finland Other and eliminations Operating profit excl. non-recurring items Non-recurring items, net Operating profit Change UPM 24

24 Net profit for the period EUR, million Operating profit Share of results of associates and joint ventures Exchange rate and fair value gains and losses Interest and other finance costs, net Profit before tax Income taxes Minority interest Net profit for the period Change Personnel at end of period 33,433 34,482-1,049 UPM 25

25 Non-recurring items 2004 EUR, million Gain on the sale of the Brooks Group Change in the Finnish statutory pension scheme Miramichi pulp mill closure costs Other non-recurring items, net Total included in operating profit Included in shares of associates' profits and financial items Change of tax law in Finland Haindl reduction of deferred tax liability Total included in net profit UPM 26

26 Return on equity % 25 FAS IFRS 20 Minimum target: 10 year bond +5 % % 0 incl. non recurring items excl. non recurring items UPM 27

27 Value creation % * incl. non-recurring items ** excl. non-recurring items ***pre tax FAS IFRS ROCE* ROCE** ~8.9% WACC*** 6.3% 4.5% UPM 28

28 Gearing ratio and net interest-bearing liabilities Gearing ratio Net interest-bearing liabilities % FAS IFRS EUR million Target: <100 % FAS IFRS % Ratings: Moody s Baa1 (negative), S&P BBB (stable) UPM 29

29 Capital expenditure EUR, million FAS IFRS Capital expenditure Changes in production and new production lines Maintenance and replacement expenditure Depreciation excl. amortization of goodwill UPM 30

30 Earnings per share EUR 3 FAS IFRS 2 2,04 1,61 Excl. non-recurring items Incl. non-recurring items, net 1 0,57 0,49 1,17 1,07 1,12 0,61 0, UPM 31

31 Dividend per share EUR 1,50 1,25 Dividend proposal Dividend paid 1,00 0,75 0,50 0,25 0, UPM 32

32 CURRENT TOPICS

33 Current topics UPM paper price snapshot Wood products restructuring Miramichi Capital expenditure UPM 34

34 UPM Paper price snapshot Good order inflow continued in January Newsprint price increases for 2005 are somewhat below 10% as an average in Europe. Magazine and coated fine paper price increases are about half of the newsprint price increases. Shorter validities have been agreed in many cases. Uncoated fine paper price increases have not been achieved. In North America magazine paper prices are today about 10% higher than a year ago. In most export markets prices of all paper grades are markedly higher than last year. UPM 35

35 Wood products restructuring Sawmilling production reduced by 400,000 m 3 Plywood capacity to be closed 70,000 m 3 Workforce reduction in UPM's internal training - 60 accepted new job within UPM - further >100 vacancies are available - 20 employed by a third party EUR 19 million mill improvement program started % Wood products ROCE-% excl. non-recurring items FAS IFRS 3.1% UPM 36

36 Miramichi paper mill restructuring - a step towards improved competitiveness 450,000 t/a coated magazine papers two modern machines 240,000 t/a BSKP pulp mill closed permanently in December Miramichi restructuring results in the loss of 400 jobs Current situation: Unionized employees (appr. 700) went on strike December 16, 2004 Strike continues, no immediate solution in sight Market impact: UPM's key customers are being taken care of No material impact on UPM's profits for the time being UPM 37

37 Ongoing and new capital expenditure Paper machine modernizations Jämsänkoski PM6, Finland Tervasaari PM8, Finland Nordland Papier PM3, Germany Docelles PM1, France Costs million Completed New projects and expansions Changshu PM1, China Kaipola RCF plant modernization, Finland Raflatac's new labelstock production line, USA Rauma new power plant, Finland Shotton new sludge boiler, UK Wood Products mill improvements, Finland MUSD UPM 38

38 OUTLOOK FOR 2005 UPM 39

39 Outlook for 2005 Paper deliveries are forecast to increase Sales prices will be higher than at the year end. In export markets, price increases will exceed losses caused by the recent weakening of invoicing currencies Demand for converted products is estimated to grow in all markets In wood products, demand for plywood and sawn timber will remain good, but the markets for sawn timber will continue to be oversupplied. The cost savings programmes will continue and costs for the current year are therefore likely to show only a moderate rise. Profitability is expected to be better than last year Capital expenditure will be somewhat higher than in 2004 but remain below depreciation UPM 40

40 Summary Business drivers developed favorably Global supply/demand balance improved Profitability was weak but a profit recovery is visible Balance sheet is strong and allows further development of UPM Profit improvement continues to be number 1 priority Can be achieved through top line growth: higher prices and better market mix cost savings and efficiency improvements UPM 41

41 Forward-looking statement 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, 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. UPM 42

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