Upm Kymmene Corp

Welcome to UPM's Q2 2024 results webcast. My name is Massimo Reinaudo and I am the CEO of UPM. Here with me is Tapio Korpainen, the CFO.

Hello all on the line.

We'll start by discussing the Q2 results and the outlook for 2024, and then we'll cover a few strategic steps we have taken to accelerate our future growth. In quarter two, our comparable EBIT increased by 60% from last year, in line with our expectations. To put this in the proper perspective, there are three main elements to look at. The market situation is the first. The demand for our products has clearly improved from last year, although the recovery moderated some way in quarter two after a stronger growth in quarter one. The second element is about our transformative investments. The Paso de los Toros pulp mill reached full capacity and reached it already before it is scheduled maintenance shutdown in June. This gives a good starting point into the second half of the year. The third element is some time-related element. Quarter two included an unusually high concentration of maintenance activities, which have been holding back our performance in the quarter. These being completed, we are now in the position to serve our customers in the second half of the year, operating at full capacity. Let me illustrate these three points one by one, starting with the market situation. The demand for our products has improved clearly from the low levels seen around the mid of last year. In the beginning of this year, the growth of the demand accelerated in most of the markets, on the back of our healthy consumers' demand and some restocking after the heavy destocking of last year. During Quarter 2, the demand development moderated, but continued to be clearly more positive than last year across numerous segments. As examples, the global pulp demand was good in Quarter 2 and was recovering well in Europe. Pulp prices were increasing and the price development was further supported by global supply restrictions. Equally, the demand of self-adhesive labels and specialty papers was significantly better than last year, but more stable sequentially from quarter one. The demand for communication papers continued to increase from last year in the first part of 2024, but more stable, again, sequentially in quarter two compared to quarter one. Plywood demand was seasonally better in Q2 as well. But on the other hand, the market for renewable fuels in Europe continued to be soft in Q2 like it was in Q1. The second point I mentioned in my introduction was about the new Paso de los Toros pulp mill, reaching full run in Q2. Specifically, the production reached the nominal capacity for a full month already before its first scheduled maintenance shutdown in June. Then the two weeks maintenance shutdown went according to the schedule and now the mill has moved from ramp-up to regular production. This is a key milestone, and we will now be in a position to operate at full capacity from now on, while we will continue optimizing the whole business platform and cost base in Uruguay. We have now 60% of our pulp capacity on a highly competitive and productive plantation-based model in Uruguay, where wood costs are low and fully under our control. The third point I mentioned was about an unusually high maintenance activity in Quarter 2. Maintenance is part of the normal run of a business and typically it is not spelled out, as maintenance activities typically distribute more or less equally or evenly during the year. But for a number of specific circumstances, we ended up having three large pulp mills and three nuclear power plants, all undergoing maintenance shots during quarter two. The impact of these shutdowns totaled to 130 million euros just in quarter two. That would be 140 if we include also the impact in quarter one. That is the sum of the fixed costs associated to the maintenance and the revenues lost during the stop of these activities. The positive aspect of this is that now we'll be able to run at full capacity for the rest of the year. Another exceptional aspect that impacted the first half of this year has been the four weeks of political strike in Finland. We estimate their negative profit impact in about 40 millions across the two quarters, but with the main part being in the quarter two. In H2, the second part of this year, we do not expect this kind of events holding us back. Now I will hand it over to Tapio for some more comments and details on our quarter two results.