Weak Q3, but there were some key positives

UPM reported weak Q3 results despite profitability exceeding the street’s expectations. Besides a strong rebound in sequential profitability after a poor Q2, there were various promising takeaways/dynamics in most divisions. While the firm is set to see a change of CEO in early-2024 – after a good run of nearly 20 years under the out-going CEO – this transition is not a worry, as UPM is on a front-footing (vs. peers) in various key aspects. Hence, its quality proposition remains attractive, desp

Poor Q2 results; but the stock remains a quality sector-play

Even UPM reported poor Q2 results – with a major profitability miss vs. the street’s expectations owing to various issues across the board. Finally, the guidance was slashed and the management even materially revised upwards the cost of developing a key growth asset. While the situation seems tough, by virtue of its balance sheet strength, impressive (cost savings) track-record and limited forest and wood market dependencies, UPM remains a quality sector bet.

Weak Q1 23 results; but still our top-pick

2023 began on a weak note, with the Q1 results missing street expectations. Normalisation in legacy paper was glaring but inevitable. While there were some vulnerabilities in non-legacy paper divisions as well, their underlying dynamics remain reassuring. Also, with sustained dominance in legacy paper, UPM could capitalise any further shortages, besides pursuing further opportunistic curtailments/conversions. UPM remains our top sector-bet, also thanks to its cost optimisation capabilities, stro

Mixed Q4, but record 2022 and much higher dividends; a quality bet

Despite Q4 sales missing street expectations, UPM has managed good results, which is also reflected in a major dividend increase – despite aggressive capex. Moreover, unlike peers, a promising 2023 guidance was shared. While UPM’s share has been very resilient (vis-à-vis peers) over the past couple of months – also justifying its premium valuation, the kickstart of various growth initiatives and intact virtues for existing offerings implies that there’s more value on offer. Hence, our positive r

‘Exceptional’ Q3 results

UPM reported ‘record’ Q3 results, with healthy performance dynamics across the board. While the promising 2022 outlook was maintained – despite the looming macro uncertainties – we still expect earnings growth/margins to normalise in the coming years. Nevertheless, by virtue of its presence/dominance in compelling businesses/markets, well-targeted growth investments, an enviable cost control track-record and a strong balance sheet – also helping sustain attractive dividend yield – the Finnish gi

‘Exceptional’ Q3 preliminary figures

UPM-Kymmene has reported extraordinary preliminary performance figures for Q3 22. These are enviable numbers for a Europe-focused corporate – both in business and asset terms – especially at a time when many larger firms are battling serious challenges. While the detailed Q3 figures should be known in few days from now, it is clear that the business dynamics across most divisions were healthy. Overall, UPM remains our preferred sector bet, especially given its ability to withstand the current ma

Strong Q2, but behind street expectations

Again, on the back of stronger prices, UPM reported impressive Q2 results – although the performance fell short of street expectations. There were healthy contributions from most divisions, despite below-par deliveries – which were crippled by strikes, maintenance shutdowns and/or other disruptions. While macro risks are on the rise, management expects 2022 operating profits to exceed 2021 levels. Overall, UPM remains an attractive sector bet and, by virtue of asset holdings/exposure, it is bett

Q1 performance moderation; but 2022 optimism maintained (for now)

Despite the impact of the Finnish strike in many key divisions, UPM’s Q1 22 results came in well ahead of market expectations. Market dynamics in most divisions remain largely promising and, hence, the firm’s earnings seem resilient – which is also reflected in the management guidance. However, considering the brewing risks and challenges, particularly in Europe, some near-term performance pressure/restraint cannot be ruled out. Nevertheless, any sell-off should be capitalised on as an accumulat

Impressive results, blotted by pulp investment ‘cost escalation + delay’

2021 ended on a strong note for UPM-Kymmene, with profitability exceeding pre-pandemic highs. This performance was led by all segments (particularly pulp and energy), except for legacy and speciality papers, and helped overshadow cost challenges. Moreover, despite an aggressive capex, the dividend and, hence, industry-leading yield was maintained. Even though management is confident of the 2022 market dynamics, cost escalation and delay at mega-pulp investment in LatAm has unnerved investors. H

Exceptional Q3 results, despite sizeable legacy paper exposure

Despite legacy paper – continuing to witness structural headwinds – accounting for one-third of group sales, UPM reported ‘record’ Q3 results. They were largely driven by exceptional pulp results and well-complemented by energy and labels. While there’s a brewing industry-wide challenge in the form of normalising wood and forest earnings, UPM is fortunate enough to have limited exposure to these areas. Instead, its growth focus supports our expectation of a medium-term healthy margin progression

Q2 was impressive; H2 guided to be even better

UPM-Kymmene reported strong results, largely driven by pulp – also the group’s biggest growth focus area. Apt support was provided by the high-margin non-paper divisions. While there were some issues in paper, management is well-positioned to leverage its past experience and market dominance to address the respective challenges gradually. Overall, UPM remains an attractive bet to play paper & packaging market’s long-term fundamentals.

Well-poised both business- and balance-sheet-wise

UPM has embarked upon 2021 on a promising note. While legacy paper remains a concern, the firm remains well-equipped to continue restructuring efforts. Moreover, with strong fundamentals across all other divisions and various growth investments underway, UPM remains on track to transform its old school positioning as a European paper major. Although such measures require sizeable investments, its strong balance sheet allays any financing concerns and, at the same time, renders an apt cushion wit

Q4 rebound + sustained dividend prowess + differentiating growth focus

UPM ended 2020 on a good note, with the Q4 performance witnessing meaningful (sequential) recovery and management deciding to maintain the dividend – despite ambitious growth plans being implemented. With various green shoots across (key) divisions and growth investments progressing well, we believe UPM remains an attractive sector bet. While the next few quarters could be tricky – due to re-emerging COVID-19 risks, market-aligned long-term vision plus a credible track record renders support to

Weak Q3 + gloomy 2020 outlook; yet UPM remains attractive

Unlike the peers, UPM’s Q3 results came in short of expectations. While operating margins did improve in sequential terms, with Communication Papers regaining profitability, the other divisions were a mixed bag. Overall, the group is yet to re-attain healthy performance levels. However, taking on board the diversity gains via non-paper growth investments, planned cost-saving measures, potential for (material) gains via revaluation of forests and balance sheet comfort, UPM remains our preferred

Worth a go at current levels

Compared with the sector, COVID-19 has taken a bigger toll on UPM-Kymmene, largely due to its material conventional paper exposure. However, given management’s impeccable past record in both restructuring (inefficient) capacities and slashing costs, generation of meaningful stakeholder returns, and pursual of growth investments (outside paper), we believe that another revival of fortunes is possible. Remember, the group’s balance sheet flexibility and sizeable redundant paper capacities render a

Jubilee Metals - Operational Update Q3 FY2024

Jubilee today reports its Q3 and third quarter operational results from its expanding operations in Zambia (copper) and South Africa (chrome and PGM). South Africa is on a growth trajectory with record chrome production of 409kt in the quarter (Q2 FY2024 381kt) and a monthly record in March of 145kt and production YTD of 1.13Mt (0.94Mt). Jubilee is well underway to its annual target capacity of 2,1Mt/yr especially with the new 300kt/yr chrome plant at Thutse expected to be operational in August

Trinity Exploration and Production - Reserves Reduction but Solid Core Business

Trinity has announced a c28% reduction to its 2P reserves following a YE23 review. Despite the decrease in the Company’s 2P reserves, Trinity’s core business remains robust, with a reserves/production ratio of >12.5 years at YE23. Whilst there is significant potential for growth within the current portfolio, this will be difficult to unlock from the current balance sheet and we believe further financing will be required. We update our target price to 76p (from 202p), a c85% premium to the curren

I3 Energy (I3E LN) - Canada royalty assets sale

I3 has announced the sale of the majority of its royalty interests in Canada, for US$24.8m cash. This allows the company to fully repay amounts drawn on its debt facility and create a working capital surplus, giving I3 significant additional funding flexibility going forward

Morning Note – 16 April 2024

Valeura Energy (TSX: VLE): Three exploration wells deliver three discoveries

• The Nong Yao-13 exploration well in the new Nong Yao D area that was targeting multiple zones has encountered >30 feet of new oil play across several new shallow intervals which have not been produced elsewhere on the concession. These reservoirs are believed to be recurring across the Nong Yao D area. • The drilling result confirms that oil has successfully migrated into this area of the block (a factor that was seen to be a risk in the Nong Yao D area) and open the opportunity for further a

NextSource Materials - Initiation

NextSource is uniquely positioned to build a leading vertically integrated position, ex China, in the supply of Lithium-ion battery anode material which is essential for the Energy Transition. The company is commissioning phase 1 of its world-class Molo graphite mine in Madagascar and is in the final permitting process for its first Battery Anode Facility (BAF) to be located in Mauritius. The company is backed by Vision Blue, established by Sir Mick Davis, former CEO of Xstrata. On our calculat

DEC FY23 Results Update

DEC reported FY23 results which were in line with expectations and announced the acquisition of joint venture assets from Oaktree along with an updated capital allocation framework.

Morning Note – 15 April 2024

Oil & Gas - Cavendish sector note

Chariot, Energean, Touchstone Exploration, Longboat Energy, Hartshead Resources, BP, Helix Exploration, PetroTal, Pantheon Resources, Caspian Sunrise, Petrofac, DNO ASA, Valeura Energy, Aker BP, Var Energi Source: FactSet, weekly change 08/04/24-12/04/24 Oil rose as Israel braced for a possible attack from Iran, a development that would threaten major disruptions in a region that accounts for a third of the world’s crude output. An assault is expected to come as soon as the next 48 hours, which

Clean Power Hydrogen - New customers and licensees circling…

CPH2 has released FY23 results with the company completing the period with a slightly lower cash outflow from operations and a higher cash balance than forecast. Looking ahead, with a new and improved technical and engineering team, the company has committed to completing Factory Acceptance Testing of its first MW scale electrolyser, the 0.5MW MFE110, within the next three months. In our view, this will be a major milestone for the company which will demonstrate that its unique technology can be

Alien Metals - Hancock Project, Mining Lease Granted

Alien today reports intraday that the Western Australian Government has granted a mining licence for the Hancock iron ore project for a 21-year term. The granting of the mining licence is the latest milestone delivered by Alien as it advances the project towards development and production.

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

Union Jack Oil (UJO LN) - Wressle update

Union Jack has released an update on its Wressle asset, reporting maturing production from Wressle-1, alongside progress for significant further development activities on the field going forward.

PROGRESSIVE: Pharos Energy: Delivering on operations and balance sheet

Pharos Energy reported FY23 results on 27 March. Group net production of 6,508 boepd (FY22: 7,166 boepd) was in line with guidance, assisted by successful development drilling in Vietnam and exploration successes in Egypt. Pharos’s strong cash generation resulted in a stronger balance sheet, with net debt reduced to US$6.6m (from US$28.9m at the end of 2022) and cash balances totalling US$32.6m. This left the group free to return more cash to shareholders, including a 10% increase in dividends,

Union Jack Oil+ (UJO, House Stock at 23p) - Wressle update