Business Environment
OUTLOOK FOR 2010
Gradual recovery in UPM’s main markets is expected to continue and demand for consumer goods is forecast to improve. Recovery of advertising expenditure in print media is slow, and this will impede growth in demand for graphic papers. Investment activity, including construction, has shown signs of recovery, and demand for construction materials such as timber and plywood is expected to pick up. Growth is expected to continue in Asia, especially in China. Disruptions in supply of fibre and plywood from Chile continue to affect markets during the second quarter.
Low capacity utilisation rates at some of the company’s timber, plywood and European paper mills will continue periodically. Necessary production curtailments will require continuing the flexible way of working in these operations.
For the rest of the year, the electricity generation volume will be about the same as last year, assuming that a lower than average hydrological balance continues in Finland. Based on current forward sale agreements and Nordpool forward prices, the average sales price for electricity is estimated to be about the same as last year.
Chemical pulp deliveries, on a comparable basis, are expected to be higher than last year. Current prices for both hardwood and softwood pulp are significantly higher than last year.
Paper demand in Europe is forecast to recover from 2009, and UPM’s paper deliveries for 2010 are expected to be higher than last year. Deliveries for fine and speciality papers are expected to increase the most. The average price in euro for all paper deliveries for the second quarter is expected to improve slightly from the first quarter of this year. UPM’s target is to increase prices in all new sales agreements.
Demand for self-adhesive labelstock is estimated to improve from last year in all the main markets. Raw material costs, especially in paper and oil-based raw materials, have increased. This puts pressure on sales margins.
The operating profit (excluding special items) for the year 2010 is expected to clearly improve from last year. Variable costs are expected to increase by about 2% from last year.