UPM Q3 2023 - Update
More pain, or is this cycle at the bottom?
My thoughts from Q2: Nothing has changed.
This is a cyclical business. The result is not pretty, but for me, it builds confidence to own UPM - UPM is in fantastic shape, ready for future cycles, and poised to grow.
Is this cycle at the bottom? When will it end? Will results grow from here? I don’t know.
UPM hinted strongly in Q2 that the bottom is in. Everybody was expecting even worse… Now, they indicate that the bottom is in. Do you believe it?
Key Financial Highlights: Q3
Sales Performance:
Q3 2023: EUR 2,584 million
Q3 2022: EUR 3,420 million
Observation: Sales decreased by 24% year-on-year…
Comparable EBIT:
Q3 2023: EUR 220 million (8.5% of sales)
Q3 2022: EUR 779 million (22.8% of sales)
Observation: A significant 72% decline in EBIT. Yes, times are tough.
Financial Health:
Net Debt: Decreased to EUR 2,363 million.
Liquidity: Strong position with cash funds and unused committed credit facilities totaling EUR 6.5 billion.
Observation: Strong - No worries here.
I am a bit late with my take (I still have my business to run), and nobody is pointing it out. Even UPM is doing its best in its presentation and reports to hide that the bottom line of Q3 was negative -53. Let’s emphasize the company's profitability from January to September 2023 (Q1-Q3). I want to emphasize that the bottom line was negative.
The UPM stock did surprisingly well after the results of +5%, I would have expected a different reaction, sitting here and guessing. Maybe the bottom is indeed in. I still like the company, and everything is going smoothly in operations OL3 is running nicely, and UPM Paso de los Toros ramp-up is progressing well. Maybe Finnish small investors realize that pulp and paper is still the only industries in which we have massive competitive advantages… Sad but true?
UPM is cautiously optimistic about the recovery of delivery volumes and potential improvements in the second half of 2023
Is this not a new normal? What is normal anyway nowadays?
New CEO 2024:
The name alone is awesome, Jussi did a wonderful job for a long time, so it will take massive fuck ups to fuck this up, and Massimo has been in UPM since 2017, so I am pretty comfortable with this pick. I would have been more comfortable with some boring Finnish guy focusing on margins… But this is a sexy pick, but is it too sexy?
Look what happened to Annica Brensky in Stora Enso (They now have this “boring pick” Hans, an awesome guy who bought shares with 1 million instantly). I will keep my eye out will Massimo keep the focus, make us shareholders happy, or try to please everybody with some sustainability bullshit metrics, etc? If they get too woke, I cut this shit. Do good business, then focus on doing the right thing, help communities, and be an awesome company.
Let’s hope the worst is behind for UPM!
Nothing changed; the long-term potential is there, and it is still an awesome company.
Keep an eye out if insiders start to sell. Why do I own UPM? Simple. I live in Finland, and it's almost a duty to own a slice of a Finnish company. And let's face it, UPM is still the best we've got here…
It's not a piece of financial advice, just pure comedy.
Stay safe and stay hard <3