The acquisition of Myllykoski boosted UPM’s Q1 sales by 10%, while overall deliveries put a strain on its earnings. Cost streamlining remains an issue.
UPM’s operating profit in Q1 this year was €155 million, 6.0% of sales (Q1 2011: €198 million, 8.4%). Net profit for the period amounted to €117 (€169m), sales were €2,591 million, 10% higher than the €2,356 million in Q1 2011. UPM said that sales increased due to the Myllykoski acquisition in August 2011, as well as higher delivery volumes in other UPM businesses.
The main negative earnings drivers related to delivery volumes and decreased chemical pulp prices, UPM explained. Delivery volumes decreased in the Paper division on a comparable basis, but increased in other businesses. UPM’s cost level was slightly lower than in Q1 2011. Sales prices increased in the Paper and Label divisions and decreased in other businesses. The net impact of sales prices was neutral on UPM’s earnings.
“Despite the seasonally weak first quarter, we managed to improve the profitability of our operations from the level of the second half of 2011. [...] Even though the low profitability of the European paper industry as a whole is unacceptable, our paper business is heading to the right direction. The Myllykoski integration proceeded as planned and we could already see the first material cost synergies. Consolidation and the consequent streamlining of costs is the most efficient way to improve the cost competiveness of this industry,” Jussi Pesonen, UPM’s President and CEO said.
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