Uruguay pulp mill boosts UPM result

Forest giant showed EUR 116 million profit in January-March

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The pulp and paper manufacturer UPM showed a profit in the first quarter of this year. However, the profit margin remains fairly low, and CEO Jussi Pesonen described the result as unsatisfactory.
      Turnover in January-March was EUR 2 billion, yielding EUR 116 million in operating profit, excluding special items.
     
Overwhelmingly the most profitable unit of UPM was the Fray Bentos pulp mill in Urugay. The installation had been owned jointly by UPM and Metsäliitto, but at the end of the year Metsäliitto had to give up its share.
      The timing of the transaction was very good from UPM’s point of view. There is a shortage of pulp, and its price is nearing record levels. One factor further boosting demand for pulp was the eartqhake in Chile, which put mills in that country out of production.
     
Newsprint and magazine paper, on the other hand, did poorly. Producers in the sector started a price war late last year; the industry has been suffering from excess capacity for a long time.
      “If a fifth of demand disappears, it will affect the pricing of the products”, Pesonen says.
      He denies that UPM is trying to steal customers from its competitors, and notes that the company shut down its newsprint mill in Kajaani, which is not something that a company trying to take over market shares would do.
      “Our goal was to improve the margin”, Pesonen said.
     
In newsprint and magazine paper, sellers and buyers have long-term contracts, which means that low prices affect the result of an entire year. At the same time, the costs of acquiring both recycled and fresh fibre are on the rise.
      Pesonen says that the company has ways of improving the result. “Cost discipline is being upgraded. Production efficiency is to be improved, and we will examine the markets on which we operate.”
      He thinks that shorter contracts are needed for the supply of paper for printing.
      UPM hopes to raise prices in all new sales contracts, but is willing to keep the conditions of the old contracts unchanged.
      The company expects profits for the whole year to show a considerable improvement over 2009.


Previously in HS International Edition:
  UN court rules in favour of Uruguay in pulp mill dispute (21.4.2010)
  Harbour strike forces UPM to shut down three paper mills (9.3.2010)
  More than 1,200 jobs to go at UPM and STX (13.1.2010)
  UPM uses plant shut-downs to fight slowing demand for forestry products (29.10.2008)

Links:
  UPM Press release 28.4.2010

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