pulp and paper company from Finland

Next plans of finnish pulp and paper maker – UPM-Kymmene

The main aim of this post is to summarize future plans of UPM Kymmene – pulp and paper maker from Finland. 

UPM – the world’s largest maker of graphic papers

UPM Kymmene (UPM) is a Finnish forest industry company, formed in 1996, by the merger of Kymmene Corporation and Repola Ltd and its subsidiary United Paper Mills Ltd. The company consists of six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Paper ENA (Europe & North America) and UPM Plywood. The Group employs over 19 000 employees, has production in 13 countries, and had a profit equal to 916 million Euros in 2015. More about UPM Kymmene you can read here: UPM Kymmene

Long-term financial targets

Quite recently, UPM renewed its long-term financial targets. According to the announcement, new targets are much higher than previous ones. See table 1 below.

Source: UPM (2017). ROCE means Return On Capital Employed, FCF – Free Cash Flow, and CE – Capital Employed.

Jussi Pesonen, UPM’s President and CEO, commented new targets in the following way:

“Since adopting the current business model of six separate businesses in 2013, we have achieved a clear improvement in our financial performance. The set-up has simultaneously opened attractive growth opportunities for us, as well as enabled us to improve competitiveness in all of the businesses. Now, we are confident we can continue to aim higher.”

Reduction in graphic paper capacity in Europe

As it was announce already in Novemer 2016, UPM decided to close 305ktpa of graphic paper capacity in Europe. By the end of Q1 2017, the Group will close down two paper machines in Austria (UPM Steyrermühl – 125 people) and Germany (UPM Augsburg – 143 people employed). According to the Group, this decision will allow UPM to save approximately 30 millions Euro.

READ ALSO: Sawmill and paper mill closures: How can a community prepare?

Anu Ahola, Senior Vice President, News & Retail, UPM Paper ENA, commented these closures:

“We understand the disappointment of our employees in Steyrermühl and Augsburg. Due to adverse market conditions continuously challenging us, we have to adjust our operations to meet the demand and to ensure a competitive future of our remaining paper assets. We conducted constructive and fair employee consultation processes at both mills, in order to diminish the impact of the closures on the personnel.”

UPM’s next biofuel investment

Currently, UPM owns one of the most advanced biofuel plants in the world, located in Lappeenranta (Finland), where it produces the biofuel for vehicles and ships from crude tall oil.

READ MORE: Express planting in Finland

Sari Mannonen, the head of UPM’s biofuels business commented fact, that plant in Lappeenranta reached break-even late in 2015 and improved profitability further in 2016, in the following way:

“We were able to improve our production efficiency clearly and the biofuel market was very favorable in the last quarter of the year”

Despite biofuels represent only a small share of sales at the moment, UPM is looking to expand the business. The decision seems to be right, especially in times of favorable renewable policy in Finland. In November, Finland’s government proposed to lift the share of biofuels blended in transport fuel to 53 percent by 2030, from the previous 40 percent.

READ MORE: Despite strong renewables policies, the EU is still highly dependent on imported fossil fuels!

It is still unknown where exactly new investment will take place. But competition does not sleep, as China’s Sunshine Kaidi New Energy Group and Nordic energy company St1 are currently also planning investments in Finland to make biofuel from sawdust and other wood residues.

Increasing pulp demand

Anssi Klinga, Senior Vice President at UPM Pulp said about increasing pulp demand:

“The long-term outlook for the global pulp market is excellent, as several megatrends will increase pulp demand in the long run. We have carried out carefully targeted investments at all of our mills in order to increase production capacity as cost-efficiently as possible”

It is worth to mention, that UPM has made big investments in recent years, in order to increase its pulp production in both Finland and Uruguay. Generally, UPM’s overall pulp capacity has grown by more than 500,000 tonnes since 2013, and now it is expected that the UPM Group’s annual pulp production capacity will reach 3.7 million tonnes in 2017.

READ MORE: Biorefinery investment for one-billion-euro in Estonia

According to UPM, over 60% of this pulp is sold to customers around the world, mainly in Europe and China. The rest is purchased by UPM’s own paper businesses.

Global demand for pulp will grow by approximately 2.5%

According to consulting company Pöyry, it is estimated that the global demand for bleached chemical market pulp will grow by approximately 2.5% per year for the next ten years. First and foremost this trend is supported by global megatrends such as urbanization and the increasing purchasing power of consumers.

Petri Jokinen, Senior Principal at Pöyry Management Consulting, said:

“The disposable income of the middle class is growing, particularly in emerging markets. This will increase the demand for pulp-based products”

Main picture: Logo of UPM. Source: UPM-logo

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