• Q1 20A EBITDA down 18%: COVID-19 did not materially impact results, unlike the EUR 30m impact from the Finnish strike. It was a quarter of two tales, record EBIT for Specialty Papers and Raflatac, while Paper was under pressure. A trend we expect to continue for the remainder of 2020.
  • Communication Papers (28% of EBITDA) sees margins expand y/y, but sharp drop q/q to 11.4%: Average prices declined by 8% y/y and by 4% q/q, while volumes dropped by 13% y/y and by 10% q/q (Finnish strike and potential closure/disposal of Chapelle newsprint mill in France). US industry demand for magazine papers was down 11% y/y, with average USD prices -5% y/y and -2% q/q.
  • Specialty Papers (19% of EBITDA) achieves record profitability: Demand for label, releases and packaging paper was healthy. Despite softer selling prices, significantly lower input costs were enough to drive record EBIT. Production was uninterrupted in China, despite COVID.
  • Raflatac (16 % of EBITDA) also achieves record profitability: Global demand for self-adhesive label materials continues to grow. Margins were boosted by slightly higher volumes, improved mix, margin management and favourable FX.
  • Well prepared for current uncertainty, with liquidity strongest amongst peers:  FY 20e CapEx of EUR 1.3bn maintained; proposed final dividend as planned. They are in a position to weigh up M&A and organic options but appear focussed on organic growth, for now.   
  • Spearheads for growth continue: The world class pulp mill in Uruguay proceeds according to plan, with expected ramp-up in H2 22e. The mill is expected to cost USD 2.7bn, adding 2.1mt (+57% to existing capacity) of BEKP with an expected cash cost of USD 280/t. The EUR 550m (ROCE 14%) investment in the biochemicals refinery (220ktpa) in Leauna (Germany) continues and scheduled to ramp-up by the end of FY 22e.
  • Guidance for 2020 remains suspended: UPM provided no insights into order books but appear comfortable that they have adequate plans in place and are busy with end-user studies across their portfolio. Demand for graphic papers (“temporary negative impact”), plywood and timber is likely to be affected by lockdowns and the following recession. They expect to see tailwinds from lower energy and logistic costs. They have rescheduled two pulp mill maintenance shutdowns from Q2 to Q4.

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