Slower business recovery, rapid fall in pulp prices lower UPM outlook

The Finnish forest industry company UPM lowered its outlook for 2023 as comparable Earnings Before Interest and Taxes (EBIT) in the first half (H1) is expected to decrease from H1 2022, said UPM in a press release on Thursday.

Full-year 2023 comparable EBIT is expected to decrease from 2022.

Earlier, UPM expected comparable EBIT to increase in H1 2023 from H1 2022, and 2023 to be another year of strong financial performance.

Destocking in the various product value chains has continued to hold back delivery volumes in most UPM’s businesses, resulting in slower recovery of volumes than earlier expected.

In addition, chemical pulp prices have fallen faster than expected, towards estimated bottom-of-the-cycle price levels. Finally, as indicated earlier, UPM has high maintenance activity during Q2 2023.

In 2023, UPM’s delivery volumes are expected to benefit from the ramp-up of the UPM Paso de los Toros pulp mill and the OL3 nuclear power plant unit, as well as the phasing out of the destocking in the product value chains as the year progresses.

UPM continues to focus on margin management during the short-term lack of volumes. Many variable cost items have started to decrease, as expected, although the cost benefit of lower pulp prices to UPM’s two paper businesses comes with the normal delay.