Upm Kymmene Corp

Hello, everyone. Welcome to UPM's Quarter 1, 2025 results webcast. My name is Massimo Reinaudo. I'm the CEO of UPM. I'm here with Tapio Korpainen, the CFO of UPM. Today, we will share the main facts and figures of our business during the past months, and we will share some views about how we have prepared to deal with the uncertainty in the current global economic and trading environment. But let's start with quarter one. We had a good start of the year and improved our business performance compared to the previous quarter. Markets improved in pulp and advanced materials, whereas they continue to be challenging in communication papers and decarbonisation solutions. Our actions to sharpen competitiveness initiated last year started to bear visible fruits in several areas. Quarter one sales were on the same level as last year. Comparable EBIT totaled 287 millions or 10.8% of sales, which is 14% lower than in quarter one last year. In the quarter, we continue to take actions to improve performance and advance growth. In Uruguay, we have now the whole platform fully operational, including the railway connection from Paso de los Toros to the port terminal in Montevideo. In Rafletec, we continue to measure the measures to improve competitiveness, while the acquisition of Metamark in the UK adds to our growth. In communication papers, we announced further capacity adjustments and streamlining to ensure continued performance. And finally, we completed our first share buyback program by early April, having repurchased 6 million shares for 160 million euros. So let's move now to the situation in the different markets. The pulp market gradually improved during quarter one, particularly in China. Market shipments grew from last year, and market prices increased during quarter one from the lows of quarter four. In advanced materials, label materials demand grew in all the main regions. In Europe, the demand exceeded the pre-COVID levels in quarter one, as you can see in the graph shown here. The demand improved in US as well, but there the pre-COVID levels were reached already some quarters ago. In plywood markets, the demand improved slightly too, although from a low level. On the other hand, in the decarbonization solutions, markets continue to be challenging. Winter is normally a high season in the electricity market, but this year it has been rather muted due to the mild winter temperatures and hydro reservoirs in the Nordic countries. And finally, the demand decrease continued for communication paper. But now, I'll hand it over to Tapio for some analysis on our results and for the outlook.

All right. Thank you, Massimo. So here we have again the comparison to the previous quarter and year on year as well. So on the left hand side, compared to the first quarter last year, EBIT decreased mainly due to lower sales prices in all business areas. Variable costs increased slightly on group level with higher wood costs, but then also lower costs for many other raw materials. Deliveries grew for pulp and raflatak, but decreased particularly for communication papers. Then on the right-hand side, looking at the sequential difference from first quarter to fourth quarter last year, sales prices were broadly stable. Deliveries grew and fixed costs decreased. partly for seasonal reasons. Variable costs in this comparison are up, but this is due to the timing of energy refunds in the communication papers that we booked in the fourth quarter last year. Excluding this, changes were minor. Cost increased for wood, but then decreased for many other inputs and raw materials. In the comparison period in the fourth quarter, We booked a significant fair value increase of forest assets, and in this graph, it's visible as a negative in the other bar. And then here we have the comparable EBIT development by business area, and starting with the advanced materials businesses, comparable EBIT recovered in specialty papers and raffle attack in the first quarter. compared to the second half of last year. This was supported by the moderate market demand growth Massimo mentioned. Rafatak captured its share of the growth and its efficiency measures started to bear fruit. Specialty papers also benefited from lower production costs. In fibers, our pulp deliveries grew 21% year on year, If we compare to the fourth quarter, both pulp deliveries and average sales price were roughly on the same level. In Uruguay, variable costs decreased, while in Finland, wood costs did increase. Thanks to the streamlined operating model in Finland, we adopted last fall, and thanks to our efficient mills, the Finnish platform continued to be profitable in the first quarter. Looking at the decarbonisation solutions in energy, the high season for the electricity market was muted by the mild winter and also affected by the high level in hydro reservoirs in the Nordic countries. Market electricity prices were 32 percent lower than last year. Our average sales price decreased by 15 percent compared to last year. The annual maintenance shutdown of Olkiluoto 3 started in the beginning of March. In biofuels, which is reported in other operations, we took a step forward towards restoring profitability with solid deliveries and decreased variable costs. In communication papers, deliveries were 17% lower than last year, or 3% lower compared to the fourth quarter. Average sales price decreased slightly in both comparisons. Thanks to the continuous actions to ensure competitiveness, comparable EBIT held up relatively well. Our financial position is solid. Net debt totaled 2.954 billion. euros at the end of the first quarter, and net debt to IPTA was 1.77 times. Operating cash flow during the quarter totaled 289 million, including a seasonal working capital increase of 112 million euros. The cash flow impact in the first quarter of the share buyback program was 116 million euros. Before going into the discussion of our outlook, let's look at the increased trade tensions and the US tariffs in particular. On this slide, we show the composition of our US business. In 2024, 14% of our sales was directed to the US. Of this, 40% was locally produced and 60% was imported, mainly from the EU. Imports into the United States consisted of communication papers, specialty papers, and some eucalyptus pulp from Uruguay. First, we expect the direct impact of tariffs to our businesses to be relatively limited. and the tariffs in general to be broadly passed through to prices. However, uncertainty in the global business environment has clearly increased. Sowing directly the tariffs may impact demand and trade flows for our products, cause hesitation among customers, disrupt supply chains and weaken consumer confidence in the coming months. The scale of the trade conflict means that there may be negative impacts on economic growth regionally and even globally. And there may be impact in terms of increased currency movements. And on this slide, we summarise UPM's foreign currency exposures. At the end of the first quarter, UPM's estimated net currency cash flows for the next 12 months totaled about 1.6 billion euros. The largest exposure was to the US dollar, worth approximately 1.2 billion euros. We hedge on average 50% of the estimated net currency cash flow for the coming 12 months on a rolling basis. In addition, the earnings of UPM's foreign subsidiaries are translated to euros in reporting. We have significant foreign subsidiaries in Uruguay, the US, and in China. So then this page summarizes our profit guidance and outlook. We have not changed our guidance range 400 to 600, 400 to 625 million euros for the first half of the year. As discussed, we had a good start to the year in the first quarter. However, pulp and electricity prices have so far realized lower than last year, which was visible in our first quarter results. And this makes last year's comparison harder to reach. In the second quarter, we will have significantly more maintenance activity than in the first quarter. We estimate the total maintenance impact in the second quarter to be approximately 90 million euros. The figure in the first quarter coming mainly then from the nuclear maintenance, 10 million euros. So, delta there about 80 million euros sequentially. Additionally, The second quarter is the low season for energy, as we are in the spring flood season, and that season only means lower electricity prices in the Nordic and Finnish market area. Obviously, the current trade conflict adds some uncertainty to short-term demand, commodity pricing, and also in terms of foreign exchange rates. So, taking into account all the seasonal factors and uncertainties, and also the current trading today, it's seen to be more challenging to arrive at the upper part of our guidance range. And now I'll hand it back to Massimo for some summarizing comments.

Very good. Thank you. Well, Tapio discussed some of the current uncertainties we are facing or the world is facing. With our solid balance sheet, competitive business portfolio and broad geographical presence, we are well positioned to face this uncertainty. Since last summer, we have been implementing efficiency and margin management measures that continue to strengthen our competitive position. Beside that, we continue pursuing long-term growth opportunities and work into a portfolio of world-class businesses. But as mentioned earlier, UPM has a diversified business portfolio with a wide geographical spread. And here you see it represented on the slide. This diversified portfolio of businesses subject to different market trends and cycles combined with an exposure to economies in different parts of the world, them too, each with our own trends and cycles, enabled a good performance delivery and resilience in every circumstance in the past. And we are confident it will serve us well going across the volatility of the next months. This also provide us with a range of attractive growth opportunities in the long term. But now, if we look at the situation in some more detail, business by business, let's start with renewable fibres. Well, in this business, we have now our world-class low-cost platform in Uruguay in full operation. Work continues to optimise and increase efficiency and those further drive down cash costs. In the medium to long term, we have good debottlenecking potential in that platform, as discussed in our Capital Market Day in last September. Meanwhile, in Finland, we have been able to maintain profitable operations at EBIT level, despite the tight wood market in the Nordic region and low pulp prices. When we go to advanced materials, our actions to improve competitiveness initiated last year started to bear visible fruits in quarter one. The labeling material markets have now recovered back to above pre-COVID levels and are expected to show healthy growth in the longer term. To put that in numbers, deliveries of labeling materials in Europe grew 1 percent year-on-year or 13 percent sequentially from quarter four. And in North America, they grew 3 percent year-on-year and 7 percent from quarter four. In both instances, we captured a fair share of that growth, while improving margins compared to quarter four. Beside that, M&A are an option to accelerate the growth we are considering when it comes in a synergistic manner. The most recent example is our Metamark acquisition in February, which is now integrated in our operations. Let's look now at decarbonization solutions. In biochemicals, the task is now to launch a completely new business. We're making good progresses with the commissioning and sequential startup of the Loina biorefinery. As discussed three months ago, we expect integrated commercial production to start in the second half of the year. And we reconfirmed the commercial interest to be high with an opportunity pipeline several times the annual capacity of the refinery. In biofuels, the short-term priority is the turnaround in profitability. As Tapcho mentioned, we achieved a good improvement already in quarter one this year. But beside that, more in the medium term, we're continuing the work of validation of growth options in this area and going ahead. Energy is facing low pricing in the short term. However, on a medium to longer term, electricity demand in Finland is expected to grow significantly. And our task is to maximize the value opportunities offered by this development. Communication paper, then, is facing or continuing to face a decline in demand and has to continuously make sure its competitiveness remains high. On this base and with this objective in mind, we took decisive actions last year with capacity and cost reductions, and we continue to do so this year as well. In March, we announced the plan to close the Ettringen Mill in Germany. and to streamline operations in this business. This would reduce our paper capacity once the negotiations are concluded by 270,000 tons and will reduce our annual fixed cost by 39 million euros. Despite these measures, we remain a large global player, the largest in Europe, and with facilities also in UK and US. And our network of meals and global sales organization provides us a unique level of flexibility when it comes to dealing with potential changes in the global flows determined by the current trade tensions. So, and in summary, Q1 was a good start of the year. During the quarter and going ahead, looking ahead, the trade tensions have added uncertainty to the global business environment. In this environment, we expect the direct impact of tariffs to be relatively limited. Whilst the economic environment is changing, we maintain firm our priorities that are improving competitiveness across all businesses and through that accelerate the growth in the mid and long term. Large and running a business which is made of large-scale businesses delivering each world-class performance remains our objective. With a solid balance sheet and a competitive business portfolio and broad geographical presence, we trust we are well positioned to face the uncertainty ahead. And this concludes the presentation today and we are now ready for your questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Ephraim Ravi from Citigroup. Please go ahead.

Thank you, Massimo and Tapio. Just three small questions. Firstly, Tapio, if I heard you correctly, you're saying the top end of the guidance looks more challenging. So if we take the midpoint of the guidance range and adjust for the incremental 80 million of cost due to maintenance, you will basically be still slightly lower quarter on quarter on an underlying basis. still the way to think about it, that the underlying business will be slightly weaker in Q2, excluding the impact of maintenance at the midpoint of the guidance. Secondly, on the biomedical business that you're discontinuing, could you give us a sense of the revenue and EBIT contribution so that we can sort of look for a like-for-like adjustment on the other line. And then thirdly, on the currency hedge that you do, the 50%, is it sort of 50% across all the currency pairs, or is there, you know, one particular currency where you are 100% hedged, maybe the Uruguayan peso or something like that? Thank you.

Yes, if I'll perhaps start from the kind of last to first As far as currency hedging is concerned, we are looking at this on a currency pair basis. We have as a policy that we aim to have 50% hedged on each pair. But of course, we are looking at that on a corporate basis. Then on biomedical, since it was, let's say, still a business in the development sort of early commercialization phase, then the revenue and EBIT impacts are not material. And then in terms of the guidance, so let's say no new sort of numbers or ranges to give at this point. So as I said, all that I'm sort of pointing out to there is that Again, kind of the trading to date, we have been obviously in terms of the energy and pulp prices sort of trailing behind last year's development. And then we have this sort of seasonal factors plus maintenance going into the second quarter. Obviously, many sort of uncertainties in this world environment upsides and downsides, which can be meaningful. Maybe the sort of balance of risks, obviously, in everybody's minds tend to be on the downside. And that's why I'm saying then that the sort of arriving at the upper part of the range is more challenging as the world looks like right now.

Thank you.

The next question comes from Charlie Muir-Sands from BNP Paribas Exane. Please go ahead.

Good morning. Thank you for taking my questions. Just on the fibre segment, I had a couple of questions, please. So I think you indicated previously that you expected to ship about. 300,000 tons more out of Uruguay this year. You already did 250,000 tons more year on year in Q1 alone. So I just wondered whether that meant that the finished business is picking back up again, or whether this is just a phasing effect, or if that's now starting to look a bit conservative. And then secondly, thank you very much for the disclosure you've given so far on on currencies at the group level. But just in terms of the fiber segment specifically, could you give us a bit of an estimate as to what proportion of your cost base there is effectively or actually dollar linked as well? Thanks.

Well, Charlie, let me take the first part of the question, and then I leave the second part about currency for consistency to tap you. But when we talked earlier on about an upside of 300,000 tonnes 2025 compared to 2024, we were referring to the output from the mill, and that was based on the fact that last year In the first part of the year, the mill was still in a ramping up phase, so it was not at full capacity. So that was referred to increase in production. The other elements are the way shipments go that follows other, let's say, timing and trajectories, but just to separate the things. We were talking about output in Paso de los Toros and not shipment directly.

And maybe I'll comment on the question on the currency. So as far as US dollar, first of all, on this net currency flows, let's say, obviously, mostly related to the pulp business because of the fact that pulp prices are quoted in US dollars. Then on the cost side, 2.4 million tons of the capacity is in Finland. The cost base there is in euros. And then in Uruguay part, part of the Uruguay costs in a sense are sort of dollar based or linked.

Great, thank you. And just to follow up on the Finnish wood costs, I mean, you flagged that they were rising still. Is that still just a lagging effect from the stumpage market, or are you starting to see the wood cost in Finland creep up again, as some of the public data is starting to suggest?

Well, mostly that is, let's say, of course, now what we see is coming from the lag, obviously, in the first quarter. But, of course, what you say also from the public sources is there as well. But what is the impact now? It's coming from, obviously, the lag. It takes up to six months before actually the... cost of wood procured, so to speak, then arrives on the bottom line of the wood consuming businesses.

Thank you.

The next question comes from Lars Kjellberg from Stifel. Please go ahead.

Thank you for taking my questions. I just want to dive in a bit to tariffs. When we're talking about, you know, probable price increases, I just want to understand the mechanics here. Are you seeking price increases from what you're selling into the US? Or is that something that your importer do? And when it comes to pulp, of course, we saw very strong demand from China. European demand has been flagging a bit. But are you seeing any demand directional changes from the Chinese side? as this turbulence has started to pick up and tariffs start to bite. And the final question I have is on Raflatak. Of course, now you're back to sort of the volumes or above the volumes you were in this business pre-pandemic. Your margins continue to lag, but as you said, you are driving improvements there in efficiency. But when you spoke last, you talked about double-digit margins. You're still a couple of points off that double-digit. Should we expect a continuation of that margin recovery and closing the gap to your number one peer in that business? Thank you.

Yeah, OK, let me take the different points. The first one about the tariffs, as Tapio has indicated earlier on, we will apply a pass-through approach to tariffs, meaning that whether it is finite products that we, let's say, export from Europe into the US and that are subject to tariffs, or whether it is raw materials which are utilized in the production, in the assets, in the meals we have in the US, we will transfer downstream the impact that are coming from the tariffs. This is the approach we are utilising in that case. Then when it comes to the second point about pulp, well, you described what has has supported sorry what has happened from a demand standpoint in quarter one when it comes to china specifically as you have mentioned we have seen a positive development of the demand in quarter one which also from a price standpoint has supported or sustained a couple of price increases in the first part of the quarter Later in the quarter, the resistance to price increases has been stronger. And that's potentially also a reflection of a weakening demand. But we don't go any further here in the speculations. Even though it is pretty understandable that in the current situation, of a trade war between US and China, which is beyond the numbers of the tariffs, it's almost a complete blockade because with this scale of tariff supply, there cannot be any profitable business flowing. It's not surprising that there will be, let's say, prudence in in the consumers' behaviours and prudence into the buyers' behaviours. So we'll see how the situation will unfold. It will hardly be sustainable for the long term, but at this point in time there is a bit of a suspended atmosphere which some impact on demand has. The third point about Refletec, yes, we indicated margins, margin ambitions, and to be precise, the EBIT margin ambition to be in the double-digit range. That remains our objective, that we reconfirm as an objective. Getting there is going to be a journey. uh of course we've been talking a couple of times a volatile environment and so on but i would say that in normal conditions uh uh that uh the double digit target may uh may be reached uh into next year or toward the end of the year but we will see more during time it will be a progressive improvement over time and just one follow-up on your u.s domestic business

where you also have labels, of course, right? And as you push higher prices for what you send into the U.S., including label papers, are you finding an ability to actually raise your domestic prices? And if so, would that actually give you a benefit on the one million still operating communication paper within the U.S.? ?

Yeah, I would say as Tapio as well described it before, we are managing the direct implications of the tariffs, which is we are protecting our margins by passing the increases through. It is true as well that we are not alone in the market, and in the market there are both domestic subjects, and we are one of them, and other players from the outside. But this is when, you know, different companies will implement their strategy, and this is where the flows may change, the market share can move. We stay positive given the competitiveness of our position over there, but this is where we enter into the second or third order of implication of tariffs, which are very difficult to assess.

Perfectly understandable. Thank you.

Thank you. The next question comes from Robin Santiverta from Carnegie. Please go ahead.

Thank you very much. Can I just ask, you also have quite extensive local production and sales in China. You alluded to the point that there's a bit of a standoff in terms of pulp demand or pulp imports into China. What is the local atmosphere when it comes to the pulp and paper industry in China as it stands now? Is the local demand of pulp end products, has that also So just curious to hear your thoughts on what is going on in China, as you're also a big local operator there.

Yes, let's say in the segments where we are present in China, as we have commented earlier on during the presentation, we have seen a rather positive development of the demand in China in quarter one. I'm referring here to labeling materials and products in that value chain. Demand has been sustained also, for example, for fine paper that we are producing and selling over there. So, I would say when it comes to the first quarter, the demand development has been pretty positive. The rest is more about uncertainty that has developed toward the end of the quarter or the beginning of April as a consequence of these different ways of tariffs that have stuck on each other. But that, I would say, is too soon to extrapolate trajectories out of it.

But is it fair to say now the day-to-day business environment has changed quite significantly to what you saw in Q1? I understand it might be temporary, but what you see at the moment is a bit different than what you saw in Q1, I would assume.

Well, it's not the way I have characterized it. It is a probability that there will be an impact of this situation. But I would say there my speculations are as good as yours or anybody else because we're really venturing when we go into a very new situation. So I can just restate that in quarter one demand has been pretty good.

I understand. Thanks. The second question I have is related to the statement you have that on actions to improve or sharpen the competitiveness of the company and that they have started to bear fruit. Can you detail what are they exactly and which segments do they impact and how should we expect those to have an impact on profitability going forward?

Yes, I would say the segments that are impacted are a bit old because every business, every unit is pursuing competitiveness, improvement objectives. But just to quote some of the of the most significant one, and also referring to public information, we disclose about that. Let's talk about DRAFLA-TAC. We have streamlined the organization as of the summer last year, moving to a regional model. a delay in the organization, increasing, let's say, market proximity and agility and taking costs away with it as well. Always in Raflatak, we have announced, I believe it was November last year, the closure of the Kaltenkirchen, mill in Germany and the move of the production in other mills where there are lower costs. If I refer to communication paper, well, we'll just talk about what we have announced in March to protect the competitiveness of the business in a market where demand has declined or is continuing to decline. If I talk, for example, about pulp and pulp in Finland, we have changed the way we operate the business in the fall last year, and basically we have... moved from, for example, managing the woods forcing timber and pulp as different units, everyone pursuing our own objective and maximizing our own objectives, to move down to an integrated management that aims to protect and amplify the profitability of the pulp business as a whole. And by the way, doing that, we have also streamlined our operations. We have changed the way we run our pulp mills in Finland, and we are running them for profit, not for capacity. What it means is that typically you run a pulp mill 24-7 at full speed, at full capacity, but in the situation the Nordic countries are in of a high wood cost and wood scarcity, we have opted for a more agile approach that aims to, let's say, run the production levels that allow to optimize the profit and minimize the impact of wood cost. So these are a number, but several of the concrete actions we have implemented already to sharpen the competitiveness in the different businesses.

Thank you, Massimo. Very clear.

The next question comes from James Perry from Citi. Please go ahead.

Hi, thanks for the presentation. I'd just like to ask again about China, sorry. I know you mentioned the good demand in Q1, potentially slowing in Q2 and the fading price momentum. But would you be able to comment at all on what you're hearing on the ground regarding the dynamics in relation to the Chen Ling situation? And how material has that been to price discussion, do you think? And do you think the pulp market participants are currently expecting a return to full Chen Ling capacity?

Thanks. Well, I... I will refrain from talking about another company or speculating about the future. But at least if we look at the situation in the past months, well, to put some numbers together, I believe the overall capacity of Changbin is in the scale of 10 million tons plus between pulp and paper of different types. And I believe it's a public fact that some sort of 70% of that capacity has been off the market until recently. I believe, referring to public information, that one or two lines have activated. I'm not sure I remember right, but it's public information. You may have it as well. in March or April, but still the majority of that capacity, to my knowledge, is still down. So, as said, without speculating on their situation, it is significant volumes that have not been on the market during this period and surely have helped to balance offer and demand and also helped the positive price development in a number of categories.

Okay thank you. You're welcome.

The next question comes from Patrick Mann from Bank of America. Please go ahead.

hi guys good morning thank you for the opportunity to ask a question i just wanted to follow up quickly on um the what you were talking about the increase in shipments versus production in the fiber segment uh so if i heard you right you were saying production would increase by around 300 000 tons but but obviously last year when it was ramping up i assume you know some of that production wasn't being shipped it was sort of stocking working capital is it possible for you to to either get give us you know how much of production last year went into into that working capital balance or alternatively give us that you know what you think shipments the increase in shipments could be this year given the increase in production and the fact that that sort of working capital is not absorbing as much anymore that's the first question thank you

Well, let's say again this sort of like Massimo was already earlier sort of referring to this 300,000 tons of additional volume production and or shipment is basically a function of that sort of trajectory or sort of progress in terms of ramping up and running at sort of full capacity for the full year now this year in terms of, let's say, the sort of inventory movements and so on. No comment on that. We don't sort of accumulate inventory as such, obviously. What is also impacting in a sense this kind of overall shipment figures and delivery figures on a quarterly basis is that again Massimo referred to kind of the way that we operated the Finnish pulp mills last year not to capacity but to the profitable tons meaning that then we did take some downtime to sort of optimize the result, which worked well during last year. And so that obviously had some impact on the Finnish volumes this year. Then we have had a good run in the Finnish operations again. So let's say, not possible to sort of go into the detail of inventory movements when we have obviously the whole platform of Finland and Uruguay combined here.

Okay, thank you. That helps. Yeah, it's more complicated than I heard initially. And then the second question I just wanted to ask on communication papers. So, you know, you kind of said at the beginning of the year that you were expecting us to return to a structural decline, and that's what we've seen. And I appreciate you've just said you're just taking out 270,000 tons. If you look at your outlook for the industry, where your utilization rates are, where the industry utilization rates are, I mean, when do you think you'll need again to potentially make further closures to match capacity to demand?

Well, this is not something we... Well, we, of course, always develop a number of different scenarios and hypotheses. That is normal. I believe every business does it. But that is not something we... How can I say? Disclose as possible scenarios, right? Because we are a player in that industry and operating rates depend by deliveries, which depends by demand. And so it's a function of many different factors, including optimizations or exit from other companies which may take place in the market. So, sorry, cannot be precise or sharp with the question, but I understand you imagine also the complexity of the environment.

I appreciate that. Thank you very much.

The next question comes from Brian Morgan from Morgan Stanley. Please go ahead.

Hi, thanks for the time. Good afternoon there. I was wondering if you can just dive into biofuels for us a little bit. You're talking about taking a step towards restoring profitability in that business. Could you dive into that a little bit about biofuels? maybe where you are in terms of operating rates, how prices have developed, how you're finding imported biofuels in Finland, and maybe just give us some sort of indication about when we might expect profitability to emerge.

Well, yes, as I said, we have... kind of started to turn the corner there. Maybe overall, one can say that we haven't seen a sort of significant or major sort of turnaround in the market as such, so limited help from the market side. So, primarily, again, it is coming from our own actions and sort of factors in a sense are, like we have described earlier, already are feedstock costs and therefore variable costs have been trending down as the sort of market price for our feedstocks has been coming down already for some time and it's arriving in a sense in the bottom line in terms of improved cost base. And let's say our sort of operating rate has been also, and rate of production has been good in the first quarter. So operationally that obviously has helped as well. So in that sense, I would say that the kind of improvement is largely driven, obviously, by our own actions. And in the meantime, let's say, being a nimble player in the market, then we try to find the pockets which are the better priced pockets for our output.

Can I just do a follow-up, if possible? What sort of... Are you able to give us any colour on what sort of uphicks you're carrying within the division from Loina?

Well, I'd say nothing further to update other than what we have disclosed already in the sort of previous quarterly presentation.

Okay, thanks very much.

The next question comes from Pallav Mittal from Barclays. Please go ahead.

Hi, a couple of questions. Firstly, on the fiber business, you have highlighted resistance to further pulp price increases and weakening demand towards the end of first quarter. Can you help us understand the discount that you are offering to customers as far as the pulp business is concerned and across Europe, America and Asia? And then secondly, on capital allocation, The share buyback program of 160 million is now completed. Considering your balance sheet and the current stock price, how should we think about more returns to shareholders in 2025?

When it comes to fibres, we don't disclose our discounts or our pricing levels, as you can imagine, whether it is in China, Europe or other parts of the world. When it comes to capital allocation, as you said and as we commented before, the share buyback has been completed. This is the first share buyback we have done. And now it's completed. I mean, we characterize it like the first time we do a share buyback, which means that there may be potentially other opportunities in the future. But I would say that for now, it's done. And in the current environment, we do attach And we believe it is extremely important to have a solid balance sheet that we have and we want to maintain. So that is going to be the priority going forward.

Thank you.

The next question comes from Andrew Jones from UBS. Please go ahead.

Hi, gents. Just on the fibre business, I'm looking at the EBITDA number, which is close to 200. And if we were doing 280 as a cash cost in the Uruguayan system, the first quarter pulp price just in Uruguay would be about 250 mil, implying like Finland will be significantly negative. Now, from what you're saying, you're running at capacity. The veil lines in. Yes, there's probably still some optimization to go. But it sounds like you should be getting close to that guidance number based upon the progress so far. So I'm kind of wondering where the cash costs are now or where they were in the first quarter. How much do you think they can improve going forward with that optimization and potential default on their king? And how much of that EBITDA is coming from Uruguay now? And what's the profitability like of the Finnish operations?

Well, maybe if I take the last part, so Finnish operations are contributing positively to the EBIT of the fibers business. Like we said, they are profitable. Our definition of profitability is not positive EBITDA. So obviously, the Finnish operations were positively contributing to the EBIT figures as well. And then we have already earlier sort of given some sort of, let's say, flavor in terms of the cost improvement that we expect in the Uruguay operations during this year, $25 per ton. Or more.

$25 compared to, is that year over year, or is that compared to where we are now?

Year over year.

Year over year, okay, in the Uruguayan system, okay. And it sounds like that still wouldn't be reaching the 280. So I guess, what's changed in your sort of thinking compared to when you set that guidance up?

I don't know anything has changed. We have said earlier as well that, let's say, the sort of 280 figure is still then kind of beyond this year, obviously, we will get closer to it as the big steps of getting the mill ramped up, getting the whole platform up to use and getting the kind of Uruguay operations as a whole optimised. Those are starting to be behind us or are behind us actually. And now we're sort of getting the efficiencies up with a full run for the full year. That will take us close, but then there is still further work to be done to sort of get to the target. figure including also kind of the improvement coming from the plantations that have been developed during the years and are now taken have been taken to full use when the puzzle site started up

Just for the sake of clarity, we said 280. We have restated 280. We didn't see 280 would have been reached in quarter one 2025. Stapio has explained, well, we are in an optimization phase. The progression toward that target is not a straight line, is a curve. Bigger steps or the bigger steps are taken away. in the first phase, and $25 per tonne is a big step that we will be materialising this year compared to last year. Other steps will come, but again, repeating what Tapio said or what we said earlier on, this is an objective that will be achieved over time through a number of success, sorry, subsequent optimizations and taking away the last dollars will take quite some time still.

Okay, that's clear. And just for clarity on the volume shipped to the U.S. from outside the country, could you just tell us what that was in 2024 in terms of tonnage for communication paper, for labels? Could you just break down what those flows were?

No, we don't have those sort of details to disclose, but obviously, let's say, given the scale of the business communication papers, obviously both for the mill in Blandin, Minnesota, but then also for the exports out of Europe to the US is kind of the largest business in a sense, but then specialty papers and RAF attack are kind of obviously sizable as well. Then the sort of exports of pulp from Uruguay is smaller, smaller part of the total.

Yeah. Okay.

Thank you very much.

The next question comes from Joni Sandvall from Nordea. Please go ahead.

Yeah, thanks for taking my question. Maybe follow up on advanced materials, especially raffle attack. You said you have taken actions since last year. So how much of these actions are currently visible and how much further support should we expect during 2025? So I'm just trying to get the grasp of the run rate improvements here.

Without getting into numbers, some are visible, and we also mentioned it, are visible in the quarter one. A part still is to be materialized and will materialize during the rest of the year. So it's not all banged in.

Okay, thanks. And second question related to Pasolustoro's deep bottlenecking potential. maintenance coming up now in Q2, so could you give any indication how much potential is there after the maintenance?

Well, this is not per se a de-bottlenecking step. Just to recall things, this maintenance shot happens 24 months after the start-up of the mill. We had a maintenance shot last year in the same period. Both these two shots at a distance of 12 months. are due to basically releasing and discharging responsibility from suppliers on the parts that they have retained responsibility upon for 12 or 24 months, which is also a good opportunity to remind that the next maintenance shot will be done in 18 months from now, therefore with the usual cadence of maintenance in a pulp mill. Yeah, but then I would say what we have indicated like the bottlenecking earlier on will come fundamentally to true phases. One is to push current production capacity throughput, let's say beyond the nominal capacity that we have reached. And that's going to be a progressive activity that will happen, let's say, directionally over the next couple of years. By doing this and pushing it further, we will be hitting a number of bottlenecks that may require let's say, investments in parts. And that will happen most likely in conjunction to one of the future maintenance shots. But this is too soon to speculate on that because we still need to go into the first phase of this de-bottlenecking. okay thanks a lot that's all from me thank you yoni and with this we have used all the time we have planned for this call and even a bit more i thank you all for your participation today and and for your questions and wish you a nice day thank you