UPM-Kymmene (UPM) CMD 2024 summary

Strategic transformation and business portfolio

• Revenue from paper declined from two-thirds to one-quarter over 15 years, with 75% now from diversified, global businesses holding top market positions; 64% of 2024 sales are from growth markets compared to 36% in 2008.

• The company expanded its global presence, with nearly half of revenues now from outside Europe, operating in 43 countries, and sales outside Europe rising from 27% in 2008 to 42% in 2023.

• Built competitive business platforms with global top 1-3 positions in key segments and world-class operations in Uruguay.

• Sustainability is a core value, recognized by independent bodies and top ESG indices, underpinning the business model and transformation.

• The portfolio is balanced across four segments: graphic paper, renewable fibers, advanced materials, and decarbonization solutions, each contributing nearly equally to profits.

Growth opportunities and investment focus

• Renewable fibers: Strong global presence, especially in Uruguay, with ongoing optimization and plans to increase capacity to 4 million tons; targeting 14% ROCE and further organic growth.

• Advanced materials: High market positions in Raflatac, specialty papers, and plywood; focus on organic and inorganic growth, innovation, and sustainability; expanding into adjacent markets and high-growth geographies.

• Decarbonization solutions: Significant investments in CO2-free energy, biofuels, and biochemicals; Leuna biochemicals plant to ramp up through 2027, aiming for 14% ROCE; Power-to-X and sustainable aviation fuels under evaluation.

• Capital allocation will shift from large CapEx cycles to a harvesting period, with EUR 3–4 billion in growth investments planned over five years, and increased cash returns to shareholders.

• M&A will be considered for value-accretive opportunities, with a strong balance sheet maintained for flexibility.

Financial guidance and shareholder returns

• Track record of robust cash flow, disciplined investment, and consistent dividends; EUR 5.4 billion invested in growth and EUR 3.6 billion distributed to shareholders over the past five years.

• Net debt/EBITDA at 1.64x, with a policy to remain comfortably investment-grade and a target of ≤2x; share buybacks may complement dividends.

• Return on capital employed target remains at 14% for major businesses; advanced materials often exceed this due to lower capital intensity.

• Cash flow from new investments (e.g., Paso de los Toros) and graphic papers expected to support further growth and shareholder distributions.

• Management aims for predictable, growing earnings and attractive, reliable dividends, with flexibility for opportunistic investments.