Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on UPM-KYMMENE OYJ. We currently have 7 research reports from 1 professional analysts.
|02Feb17 09:30||GNW||Employee consultation processes at UPM Steyrermühl and UPM Augsburg ended|
|24Jan17 08:00||GNW||Invitation to UPM's press conference and webcast on Financial Statements for the year 2016|
|03Nov16 09:30||GNW||UPM Paper ENA plans to reduce 305,000 tonnes of graphic paper capacity in Europe|
|25Oct16 07:31||GNW||Interim report Q3/2016: Performance improvement continued into second half of 2016 - excellent, seasonally strong Q3|
|18Oct16 08:01||GNW||Invitation to UPM's press conference and webcast on Interim Results for the third quarter of 2016|
|11Oct16 11:00||GNW||UPM Raflatac expands its asset platform in Wroclaw, Poland to meet the label stock demand growth in Europe|
|30Sep16 07:00||GNW||UPM Paper Asia to be renamed UPM Specialty Papers|
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Research reports on
Q4 moderation was expected; will the profit momentum be sustained in 2017?
03 Feb 17
UPM-Kymmene’s Q4 16 results came in ahead of our estimates. Overall, the full-year (FY16) results were impressive, with profit improvements being the key highlight. Top-line remained lacklustre Sales: Q4 – €2.5bn (-3.8% yoy; +1.3% qoq); FY16 – €9.8bn (-3.2%; broadly in line with AV estimates) Weak Q4 volumes (-4.7% yoy; flat qoq) and price pressure (flat yoy in the euro area, though down 3% overall; -1% qoq) continued to weigh on Paper ENA’s sales (-6.3% yoy; -0.5% qoq). Except for a sequential price rebound (+8%), the situation in Energy (-18% yoy; +1.1% qoq) was very similar, as volumes (-7.9% yoy; -4.2% qoq) and prices (-8% yoy) remained weak. For Biorefining (i.e. pulp), despite reasonable volumes (+3.1% yoy; -2.1% qoq), oversupply-induced price weakness (-12% yoy; flat qoq) resulted in sales declining (-8.7% yoy; -1.5% qoq). These Q4 divisional trends reverberated throughout FY16, thereby more than offsetting the resilience in Special Papers (i.e. Paper Asia) and Raflatac (i.e. labels). Another cost-savings-driven FY performance Adjusted EBIT: Q4 – €229m (-0.9% yoy; -25% qoq); FY16 – €1,050m (+30%; +6.3% ahead of AV estimates) The fact that Q4 profits were relatively weaker was not a surprise as management had already guided for a maintenance shutdown impact in pulp and negative seasonality effects. Also, given that the Q3 profitability was exceptionally strong (especially in Paper ENA), normalisation was a given. Keeping aside these factors, the profitability rebound in paper – primarily on the back of cost savings – continued to impress. On an FY basis, barring pulp and energy (which have been marred by tough markets), all divisional performances (paper in particular) were healthy. Mimicking the operating performance, Q4 net profit came in at €187m (-3.1% yoy; -30% qoq). For the full year though, despite the lack of sizeable forest revaluation gains, net profit was down only 3.9% to €880m. This was not the case for Stora, where a combination of weakening operating profits and fair valuation losses on operating assets blemished its full-year bottom-line. Dividends backed by a strong balance sheet Healthy profitability along with working capital releases culminated in strong reported OCFs of €405m (+3.8% yoy; -20% qoq) and €1.7bn (+42%) for Q4 16 and FY16, respectively, while completion of most growth investments resulted in conservative (-19% yoy) full-year capex (€351m). Net debt declined 22% (vs. Q3 FY16-end) to €1.4bn. As a result, the group declared a generous dividend of €0.95/share (+27% yoy; 13% ahead of the AV estimate).
Paper’s strong rebound adds to the earnings zing
01 Nov 16
Yet again UPM-Kymmene has posted operating results materially ahead of the consensus and AV’s expectations. Q3 16 sales came in at €2.4bn (-3.4% yoy; flat qoq). Despite 7.2% higher Asian paper volumes (driven by the ramp-up at Changshu), the continued weak pulp and energy prices (both down 14%) and a challenging European paper environment (prices and volumes down 2% and 2.9%, respectively) weighed on the top-line. However, a sequential rebound in energy (+6.9%) and European paper (+6.6%) volumes, and pricing improvement/stability (across most divisions) cushioned this somewhat. Profitability improvements continued unabated with an adjusted EBIT of €305m (+41% yoy; +22% qoq) translating into a record operating margin of 12.5%. Paper ENA again surprised (adjusted EBIT came in at €112m vs. €8m in Q3 15 and €45m in Q2 16) on the back continuous cost savings, favourable comps (as Q3 15 had been marred by unfavourable currency hedges) and seasonal benefits. Growth investments in Paper Asia and Raflatac (labels) – benefiting from growing volumes and/or an improving product mix – too witnessed a healthy profitability progression. Even though profitability in Biorefining (-23% yoy; -5.3% qoq) and Energy (-33% yoy; +36% qoq) suffered again due to weak prices, sequentially there was some relief. Operating improvements percolated down, with net income coming in at €268m vs. €408m in Q3 15 (which included €289m of forest revaluation gains) and €198m in Q2 16. Strong reported OCFs of €506m (+39% yoy; +17% qoq) and conservative capex (given that most growth investments are already through) resulted in net debt being further reduced (down 20% vs. end Q2) to €1.8bn. Management guides Q4 16 performance to be negatively impacted by seasonality, and maintenance activity in Biorefining (pulp) and Paper ENA.
Yet another strong performance compels a material earnings upgrade
27 Jul 16
UPM-Kymmene’s Q2 results (barring the top-line) were ahead of consensus and AV expectations. While Paper ENA continued to suffer from the ire of weak prices (-2%) and volumes (-5.2%), lower pulp prices (-12%) and sombre energy market dynamics (prices and volumes down 13% and 5%, respectively) exacerbated the sales pressure (€2.4bn; -4% yoy). Although sequentially sales were flat due to volume support from Raflatac (labels), Paper Asia and Plywood. Despite the top-line vagaries, UPM’s profitability delivery remained strong. Adjusted EBIT came in at €251m (+34% yoy; -5.3% qoq). All divisions, with the exception of Biorefining (pulp) and Energy, witnessed meaningful improvements. These improvements were a combination of initiation of/pick-up in earnings contribution from the growth projects and strong delivery on (fixed and variable) cost savings. However, bottom-line gains mellowed (net profit of €198m; +24% yoy; -13% qoq) due to: 1/ lower gains from revaluation of biological assets; and 2/ higher income taxes. Cash flows remained healthy, both yoy and qoq. Reported OCFs came in at €434m (+34% yoy; +27% qoq). Even after the full-year dividends payments in Q2, UPM’s debt remained largely unchanged at €2.3bn. Management guides for profitability improvements to continue in H2 16 on the back of the incremental contribution of growth investments and the continuation of cost rationalisation.
Paper joins the party with pulp and labels
28 Apr 16
UPM-Kymmene’s start to 2016 could not have been better with the profitability coming in materially ahead of the Street’s expectations. Although sales were a bit disappointing having declined 1.6% yoy (and 5% qoq) to €2.4bn as European paper volumes (down 2% yoy and 8.7% qoq) continued to sag, with sequential weakness being aggravated by lower pulp and energy prices, and seasonally lower label volumes. However, a material turnaround in the paper ENA and continuation of the good performance in pulp and labels (better margins) helped adjusted EBIT surge by 37% (and 15% qoq) to €265m – a record high. Paper ENA’s EBIT came in at €46m vs. €5m and €18m in Q1 15 and Q4 15, respectively, due to a combination of (fixed and variable) cost savings and the absence of unfavourable currency hedges (unlike the previous periods). Overall, a combination of cost efficiencies (across businesses) and the contributions from growth projects helped profitability gain momentum, after a subtle 2015. Net profit galloped 46% (and 18% qoq) to €227m (despite €29m of charges related to the closure of the Madison Paper Industries JV) and reported OCFs came in at €341m vs. €108m in Q1 15. Although OCF comps were skewed by a one-off working capital use of €147m in Q1 15 vs use of only €14m in Q1 16. UPM’s use of leverage continued to reduce, with net debt reaching another record low of €2.2bn (-8.9% qoq). On the day of the Q1 results release, the group also announced sale of its Schwedt newsprint mill (c.3% of capacities) in Germany to LEIPA group for a consideration of €70m – which is line with our NAV estimates.
Operating improvements continued despite languishing paper
04 Feb 16
UPM-Kymmene ended 2015 on a high with its Q4 and 2015 results exceeding AV and consensus estimates. These results fructified in spite of paper (a key outperformer in 2014) failing to deliver in 2015. *Some top-line growth* Sales: Q4 – €2.6bn (+1.7% yoy; +1.7% qoq); 2015: €10.1bn (+2.7%; +1.5% ahead of AV estimates) Q4 sales were supported by solid growth in Biorefining (pulp; +21%) and Raflatac (labeling; +10%) where a materially weaker Euro (down 14% vs. USD) was the key driver, despite persistent weakness in paper volumes and prices, energy prices and plywood volumes. With feeble European paper being a top-line drag since 2013, UPM finally achieved top-line growth with trends similar to Q4 resonating throughout 2015. *Highest annual EBIT since 2006* Adjusted EBIT: Q4 – €209m (+5.6%; -3.2% qoq); 2015: €808m (+5.5%; +1.6% ahead of AV estimates) Cost optimisation has become an area of unwavered focus for UPM over the years, with the group achieving €41m and €150m of savings during Q4 and 2015, respectively, under the profit improvement programme. Although some of the gains were lost (€24m and €114m in Q4 and 2015) due to unfavourable currency hedges and higher Euro-denominated pulp prices (thereby increasing raw material costs), which primarily impacted the paper businesses. Even sequentially, barring some unexplained intersegment losses, performance across divisions remained robust – especially for the energy segment (+29%), which benefited from lower energy purchase costs. Attributable net profit: Q4 – €193m vs. €8m and €408m in Q4 14 and Q3 15, respectively; 2015: €916m (+79%; +6.8% ahead of AV estimates) Unlike Q4 14 – which was marred by €135m of paper asset impairments – Q4 15 was blemish-free. This was also in stark contrast with Stora Enso which has already announced €262m of impairments for Q4 15. In addition to the operating improvements and no hefty impairments, a one-time gain on forest assets (€265m in Q3 15) culminated into a staggering full-year net profit growth. Although further down in the statement of comprehensive income, €307m and €405m of losses were recognized in Q4 and 2015, respectively, on available-for-sale investments (primarily comprising the ill-fated TVO nuclear assets). *Balance sheet supported growth investments and dividends* Even though OCFs weakened a bit (-5.7%) to €1.2bn as last year’s working capital benefits reversed, a resilient balance sheet (net debt down 12% to record low levels of €2.4bn) helped UPM pursue its growth investments – with 2015 capex up 14% to €432m. Also, full-year dividend was increased by 7.1% to €0.75/share (+3.6% ahead of AV estimate). With most growth investments in place, management guides €350m capex for 2016.
Gains from forest revaluation add to the EBIT improvements
29 Oct 15
In continuation with its Q2 performance, UPM-Kymmene maintained its business momentum in Q3 15. Sales were up 4.8% yoy (-0.7% qoq) to €2.5bn, driven by material benefits from a depreciating euro (down 19% vs. the USD) impacting the Biorefining (pulp) segment, followed by strong Raflatac (labelling), Plywood (+6.5%) and Energy (+9.6%) volumes. The top-line grew despite lower pulp volumes (-9.1%; due to scheduled maintenance shutdowns), and still weak paper and energy prices. Adjusted EBIT came in flat yoy at €217m as the group managed to reduce its variable costs by €52m (underpinned by a €150m cost savings programme – 73% achieved so far) and realised €19m of net forex benefits (as most gains were moderated by €29m losses on currency hedges in the paper businesses). Although, sequentially some fixed cost rationalisation (after paper capacity curtailments in H1 15) facilitated an 11% improvement in operating profits. Similar to Stora Enso, UPM too recognised (one-off) gains amounting to €289m on the revaluation of its forest assets. Consequently, net profit jumped 1.2x to €408m (+1.6x qoq). Reported OCFs continued to improve (+21% yoy; +12% qoq) to €363m as working capital improvements were sustained – release of €48m vs. use of €36m in Q3 14 and release of €31m in Q2 15). Management reiterated its 2015 profitability outlook being similar to the performance achieved in 2014. Although its optimism over an anticipated H2 recovery in the paper business will not materialise, adequate support should surface from the pulp business.
20 Feb 17
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The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
Opuama production restarts
21 Feb 17
Eland has confirmed the successful restart of exports from OML 40 through the new shipping alternative that it has implemented. Sales from the export terminal are expected imminently, re-establishing cash generation for Eland. Cash at YE16 was US$11.1m which has since reduced to US$5.9m, mainly reflecting initial operating expenses for the shipping alternative. While it is early days, Eland has demonstrated its ability to restart exports and production from OML 40 following the shut-down of the Forcados terminal a year ago. Production to date is averaging around 7kbd and we expect that to ramp up as Opuama operational performance improves. At US$55/bbl Brent, we estimate Eland is generating a net cash margin of around US$25/bbl. We reiterate our Buy recommendation and 95p per share Target Price.
Small Cap Breakfast
24 Feb 17
GBGI—Schedule One update from integrated provider of international benefits insurance. Raising £32m at 150p. Admission expected tomorrow. Anglo African Oil & Gas— Admission expected early March. Acquiring stake in producing near offshore field in the Republic of the Congo. Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb.
Operating update and shareholder activism
15 Feb 17
December and January have seen the emergence of shareholder activism at Bowleven (BLVN), bringing its strategy and management into greater focus. Its largest shareholder (Crown Ocean Capital, COC) evolved from being a supportive shareholder to voting against a number of resolutions at the December AGM, to recently calling for the widespread removal of the board and a radically different company structure. Operationally, the company reports that a new development concept is under review by the stakeholders in Etinde, where production would be piped to existing gas processing facilities in Equatorial Guinea. Such a solution would (if approved) require significantly less capex and could be brought online relatively quickly vs other solutions (fertiliser, FLNG, gas to power). We leave our valuation largely unchanged, save for a revision to cash holding to reflect the recent operational update. Our new core NAV is 49p/share.