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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
Companies: UPM-Kymmene Oyj
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.
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
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
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
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
After a weak Q1, UPM’s performance severity aggravated in Q2. The situation was complicated by extreme COVID-19-induced pressure in conventional paper – also the group’s biggest division (c.33% of sales). However, taking into consideration management’s prowess to (effectively) deal with paper market challenges, and the potential of on-going transformational projects and pandemic-triggered gains for various divisions, our recommendation should be maintained.
UPM also embarked upon 2020 on a weak note. There was a pertinent (profitability + cash flow) weakness at the group level. Fortunately, the divisions with packaging credentials did well, while the net cash position was maintained. Although the performance is likely to erode further in the coming quarters, UPM by virtue of its balance sheet resilience and other underlying strengths should do reasonably well.
Despite material pulp market headwinds, especially in Q4 19, UPM reported stable full-year results. The turnaround in paper and energy, along with sustained cost optimisation, rendered meaningful support. Moreover, UPM now has two sizeable high-growth projects – in pulp and biochemicals – underway, and its strong balance sheet position should render a valuable cushion. Although the brewing (Coronavirus-induced) macro uncertainties is a (near-term) cause for concern.
Even though market conditions have become tougher, UPM managed to limit its Q3 business impact via effective cost savings. Interestingly, management has guided to maintain its 2019 performance at a good level. Continuation of paper rationalisation and the pursual of high-potential growth opportunities adds to the group’s overall investment attractiveness.
Q2 results came as no surprise as profit normalisation – after excessive gains in 2018 – is slowly materialising. Even though pulp markets/prices are expected to soften further in the coming years due to evolving demand-supply dynamics, pulp’s long-term prospects remain sacrosanct – reflecting UPM’s decision to invest $2.7bn in a new pulp mill in Uruguay. Through a combination of sustained restructuring measures and non-paper growth investments, UPM is gradually expected to reduce its legacy pap
2019 began on a strong note for UPM-Kymmene. Healthy performances were sustained across all divisions, with the exception of Speciality Paper – where the scope for meaningful recovery still remains. While management guides for the secular decline of conventional paper to be sustained, it remains focused on niche, though high-potential, growth opportunities. These efforts should be backed by UPM’s undisputed balance sheet strength. Moreover, cost optimisation measures, in which the group has an i
The year 2018 ended on strong note, with healthy operating earnings across divisions – excluding Specialty Papers – being further complemented by material forest revaluation gains. As a consequence, profits soared to record-highs – despite growing cost pressure, and the balance sheet resilience was maintained. Now, the next leg of growth should come from (transformational) investment plans – with a net cash position lending a more-than-needed financing cushion.
While UPM’s Q3 results were healthy, they were somewhat capped by temporary disruptions. Price movements were positive across divisions, with pulp and energy being big beneficiaries. However, as some of pulp’s recent gains seem to be driven by transient events, some medium-term pricing normalisation seems inevitable. Nevertheless, improvements/stability in the smaller divisions should continue. With fundamentals remaining strong, the recent sell-off offers an attractive entry point.
The Q2 results were in line with the Street’s expectations on the back of better prices across divisions, despite lower volumes, higher costs and the material maintenance shutdown impact. While pulp and paper’s market tailwinds should continue in the near term, even other divisions should perform well – given the supportive market environment. Despite the brewing inflationary pressure and eventually normalising margins, the group should manage to maintain its robust cash flows and, hence, its st
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Following the announcement of test results for all three zones at Royston, where we now see a compelling oil development opportunity, we have revisited our FY21F and FY22F estimates for Touchstone and introduce numbers for FY23F. Our forecasts for the financial year just ended are not materially changed (certainly in revenue and net profit terms) – with Touchstone’s results for the nine months to September having previously indicated that it was tracking reasonably well against our estimates for
Companies: Touchstone Exploration Inc
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Companies: Shanta Gold Limited
Pantheon Resources announced that it has commenced drilling the Theta West #1 well, which has now drilled to a depth of 1,874 feet – target depth is circa 9,200 feet. The well is targeting i) the Upper Basin Floor Fan and ii) the Lower Basin floor fan, both of which are referred to as Theta West. Theta West has a combined best estimate success-case recoverable resource of 1.4 billion barrels of oil.
Companies: Pantheon Resources plc
Savannah’s FY21 trading update demonstrates continued progress at its Nigerian operations, with strong growth in gas volumes, revenues ahead of guidance, robust cost controls and net debt levels declining. This should be encouraging for investors as Savannah expands its sphere of operations and looks to deliver growth on multiple fronts – the recently announced Chad/Cameroon acquisitions are highly accretive and set to more than double the scale of the company’s operations, while additional grow
Companies: Savannah Energy Plc
Initiating Coverage: Price Target 20p
Potential Beyond Tin
AfriTin Mining Limited (ATM) is one of only three listed tin producers in Western markets. It has a large (820km2) land package in Namibia comprising 5 prospective licenses of which the Uis mine is the most advanced and already in production. Near term growth is being delivered with an 80% increase in tin production between 2022 and 2024. However, this is only scratching the surface and there are more than conceptual plans being fo
Companies: AfriTin Mining Ltd.
West Newton potential flow rate analysis
Companies: Union Jack Oil Plc
• Oil production has been averaging ~20,000 bb/d since January 12, 2022 with export routes, including the Northern Peruvian Pipeline, fully functional. From 16/12/2021 until 12/01/2022, production was constrained to ~5 mbbl/d to manage storage capacity and barge availability due to pump station 1 bottlenecks. This resulted in 4Q21 production of 10,147 bbl/d, below our expectations of 11,500 bbl/d. All these issues have now been resolved.
• The 8H and 9H wells continue to perform very well with p
Companies: PetroTal Corp.
As part of the Stage 3 work programme, Falcon Oil & Gas has confirmed that it will embark on a fully-funded, high-impact, extensive work programme in 2022. The Company will drill, fracture stimulate and test two 2,000m+ horizontal wells, with the aim of providing line of sight to the commercialisation of the Beetaloo. The programme will focus on the Amungee Member B shale, following the successful production log test in 2021, which suggested a normalised gas flow rate of 5.2-5.8MMscf/d per 1,000
Companies: Falcon Oil & Gas Ltd.
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Rutherford Health has left the AQSE and Prime People has left AIM.
What’s cooking in the IPO kitchen?
ACP Energy plc, a company formed for the purpose of undertaking an acquisition or acquisitions of a majority interest in a company, business or asset, seeking to join the Main Market (Standard) The Company intends to focus on opportunities in the natural resources sector, raising gross proceeds of £830k. Due 28 Jan.
Artemis Resources ltd, an ASX listed mining
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Sumo Group has left AIM following a takeover.
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Unbound Group PLC, (currently called Electra Private Equity PLC) to join AIM. Unbound Group, will be the parent company for a range of brands focused on the 55 plus demographic. Initially focused on Hotter Shoes, Unbound's curated, multi-brand retail platform will offer additional products and services that will enhance the enjoyment and wellbeing of its targeted customer communit
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Hercules Site Services a technology enabled labour supply company for the UK infrastructure sector, intends to float on AIM. Hercules is seeking to raise approximately £5.5m to rapidly deliver on the significant demand it is experiencing for its diverse range of services across the UK infrastructure sector, including to scale up its operations to supply labour to the northern section of the HS2 rail project
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Full year 2021 trading update
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