Declining earnings in many of UPM's divisions have led to a significant drop in the company's profits for the first half-year 2012. UPM does not expect the earnings situation to improve in the second half of the year, neither.
Weakness in the general economic conditions as well as slowing demand in several segments left its mark on UPM’s results for the first half-year 2012. The company’s net profit more than halved year-on-year, decreasing from €464m in the first half of 2011 to €204m this year. The operating profit in the first six months of 2012 was markedly down, too, amounting to €247m against €487m in the same period last year. Nevertheless, UPM emphasised that profitability of its businesses improved compared to the second half of 2011.
One factor having impacted consolidated results negatively was said to be the development of the Other operations division. The segment slipped further in the red and generated an operating loss of €61m in the first six months of the year, down from -€35m in the first half-year of 2011. This was mainly due to fair value losses in currency hedges, UPM explained.
According to UPM, the company's result was also down due to a decline in pulp sales prices. In the first half of the year, average prices for NBSK and BHKP had been 8% and 7% lower, respectively, than in the same period of 2011, the company said. Consequently, the pulp sector was not able to improve results, neither. The division’s operating profit declined by around 45% to €168m in the period of time.
A reduction of fixed costs and some of the variable costs, e.g. for fibre and energy, positively impacted the company’s earnings situation. UPM said that cost synergies related to the Myllykoski acquisition, completed on 1 August 2011, were not fully realised yet but would do so as from 2013. From January to June, however, synergy benefits had reduced the costs of the Paper division by about €70m, the company added. All in all, the Paper division developed favourably in the first half of the year. With an operating profit of €38m, the segment was back in black after a €21m loss posted in the same period of the previous year.
The Myllykoski acquisition also played a role as regards delivery volumes. UPM reported that shipments in most of the company’s businesses had increased pushing sales up in the first half-year of 2012. Turnover for the period reached €5.21bn, up by 9% year-on-year.
UPM does not expect profitability to improve materially in the second half of 2012. The company therefore believes that the operating profit excluding special items for the full year 2012 will be lower than it was the year before
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