UPM-Kymmene Oyj (UPM) Earnings Call Transcript & Summary

[Presentation]

[Foreign Language] Good afternoon to everybody. I am Johan Aalto, and I wish you welcome to this Annual General Meeting of UPM-Kymmene Corporation. I will act as the Chair of this meeting. And we will start the meeting by listening to a greeting by the Chairman of the Board of Directors, Bjorn Wahlroos.

[Foreign Language] Dear shareholders. UPM opens its virtual Annual General Meeting this year in a world that has changed pretty dramatically over the course of the past several months. Here in Europe, of course, the greatest incident we've had to deal with is the Russian attack on the Ukraine, which still remains very much active, and which has produced a war in the middle of Europe, where we haven't had a war for the last 70 years or so. Unfortunately, the European continent doesn't seem to really learn from its past. And unfortunately, Russia doesn't seem to be learning from its past, either. For us at UPM, that has not meant that much of a challenge, at least not in the short run, and I hope not in the longer run either. However, the year that we have just experienced has been filled with a number of other challenges which, to put it very briefly, I think we've done rather well dealing with. The year, of course, started out and a large part of it was dominated by the global pandemic, which, particularly for a company with very large investment projects underway, was a huge challenge. I'm very happy to report that UPM has performed admirably even if the challenges have been huge. I was in Uruguay 4 weeks ago, and it was really impressive. The plant we're building in Paso de los Toros is, to quote a former American President, huge. It really is huge. I've seen a number of pulp mills in my days. This, the world's largest mill, is really out of this world. The other take from my visit was that it's really, really impressive that our people have been able to erect this enormous structure to put this mill on track to be ready to start producing pulp with a delay of no more than 3 or 4 months under conditions that have been really, really challenging. We are now ready and scheduled to start production in a little less than 1 year's time from this moment. The railroad will not be quite ready by then. We expect it to be in operation in the summer of 2023, but we will have railroad transport anyway. We would have to have backup in any case, and we will be able to commence operations at the plant in March as we have announced. It is a fantastic plant, and it will transform UPM as it will propel UPM to the second largest producer of chemical pulp in the world. There have, of course, been other challenges as well. We are sorry to report that we are a bit more late on our plant, on our investment into Eastern Germany, where we are designing the world's first plant that will start producing raw material for PET plastics out of wood raw material. However, that project is proceeding well but a bit behind schedule -- a bit more behind schedule, I should say. Other than that, of course, the year was very good for UPM. We produced another near record result. We -- we're strong in virtually all of our business areas. There were challenges in traditional communication papers, of course, and these challenges continue as we proceed, although now, of course, the market for communication paper in Europe is pretty tight. The reason for the tightness is primarily the fact that our Finnish plants have now been on strike for more than 11 weeks. This may seem like an oddity in the sense that we're not used to having these big strikes anymore in Scandinavia. This time around, it was just necessary to take a very strong line in the negotiations with our major union. The reason is actually very simple. If we want to have our paper machines running, if we want to have paper mills in operation in Finland, we simply need to set up a new contract with our workers, with their unions. And that contract will have to be way more flexible, and it will have to allow for flexibilities that makes it possible for our Finnish paper machine to -- machines to maintain their competitiveness with their European peers. Unfortunately, the unions have not been very flexible in negotiations. And as a consequence, as I said, we are into the 12th week of the strike, which may well continue for several weeks. That, of course, will take a bite out of UPM's Q1 result for 2022, but relative to the overall economic performance and the overall value of the company, it's not a material thing to consider. We will just have to defend our Finnish production capacity, particularly on the Communication Papers side. Looking beyond the immediate situation in Finnish labor market, of course, the company works very, very well. Our market position in Europe is second to none both in Communication Papers and Specialty Papers in pulp and in many other products that we take to the European market. And of course, globally, we are unique. Our Chinese plant, our Uruguayan pulp mills, our all part of the UPM family able to supply the world with biological fiber. That really is the big strategic outlook ahead. We see all the major trends of the world now supporting the UPM idea, Biofore. UPM is essentially at the forefront of supplying biological molecules as a substitute for petrochemical fossil ones. That is a trend, which is likely to continue for many years if not decades. And as a consequence, the way we are positioning the company towards growth in producing biological fibers, starting with the plantations we own, the forest land we have in Finland, the plantations in Uruguay, and going all the way through to refined products. But ultimately, offering the world an alternative to fossil molecules in its packaging, in its printing, in many, many other forms of consumer products, in fuels and many other endeavors that we will be seeing the consumers undertaking in years to come. With this in mind, it is interesting to see how UPM will go forward. I will myself now be -- I'm a candidate to be elected Chairman for this company, if I may say so for the last time. And as a consequence, of course, I'm very happy to see that I would be able to turn over a company, which not only is able to perform very, very strongly in its immediate financial result, but also able to look forward with confidence based on a strategy, which is strongly supported by the major trends we see in our societies today. UPM is really powerful. And as it looks forward to starting up the Paso de los Toros plant and as it looks forward to a future as one of the prime producer of biological fibers and products based on those fibers, we can all feel confident that it really is and will remain a really great company and becoming even more so. With those words, I wish you very welcome all of you to our virtual AGM. There are no dramatic things on the agenda. But we will, of course, conduct the proceedings in accordance with the rules and regulations. So a very warm welcome, and I hope you will appreciate the presentations that we have added to the virtual proceedings of the AGM. Welcome.

[Foreign Language] We will now move on to item #2, calling the meeting to order. [Foreign Language] So due to the COVID-19 pandemic, the AGM will be held as a remote meeting based on temporary legislative acts. It's, hence, not possible to attend the meeting in person. By operation of law, the company's shareholders have been able to attend the meeting and exercise their shareholder rights only by voting in advance and submitting counterproposals and asking questions in advance. The company received 5 questions from shareholders before the deadline, and answers to these questions are available at the company's website. And instead of repeating all formalities, they will be compiled in the minutes of the meeting. Thank you for your cooperation and understanding in making this meeting possible despite the extraordinary measures. [Foreign Language] Anna Sahrakorpi will scrutinize the minutes and supervise the counting of the votes. [Foreign Language] Recording the legality of the meeting. [Foreign Language] We will record and state in the minutes that the AGM has been legally summoned and constitutes a quorum. [Foreign Language] We will record the attendance at the meeting and adopt the list of votes. [Foreign Language] We can note that a total number of 2,737 shareholders are represented at the meeting, and they represent approximately 58% of all shares and votes in the company. We can also state that the votes given in advance from a required majority for each matter on the agenda to support the proposals given by the Board of Directors and its committees. And we will separately vote -- inform you about the voting results under each item. Hereby the list of votes is confirmed. [Foreign Language] We're now going to have the financial statements report of the Board of Directors and the auditor's report for the year 2021 presented. [Foreign Language] The President and CEO, Jussi Pesonen, will now present his review regarding the year 2021.

[Foreign Language] Dear shareholders, welcome to UPM-Kymmene's Annual General Meeting. Our Chairman of the Board actually analyzes, in his opening words, the year 2021 quite in details and all of the challenges, and I can only fully echo his wording. Our focus has been in 3 things in 2021. First of all, the transformative big investments, Paso de los Toros and Leuna, have been in our focus throughout the whole year, and we have been very successful on those projects. Secondly, protecting the performance of UPM in all of the 6 business areas and also our global functions. And thirdly, we have been looking forward to look at the way of working, especially here in Finland, when it comes to CLA, and that has been in our development. But we will be coming back on those topics later. [Foreign Language] [Presentation]

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[Foreign Language] We'll move to the auditor's report. [Foreign Language] We can hereby note that the financial statements, the report of the Board of Directors and the auditor's report have been presented to the Annual General Meeting. [Foreign Language] We're about to adopt the financial statements. [Foreign Language] You can see the voting results on the board. [Foreign Language] The financial statements have been adopted. [Foreign Language] Resolution on the dividends. [Foreign Language] You can see the proposal. [Foreign Language] And here are the voting results. [Foreign Language] The proposal has been adopted. [Foreign Language] Resolution on the discharge of the members of the Board of Directors and the President and CEO from liability. [Foreign Language] We can note that the Board -- members of the Board of Directors and the President and CEO has been discharged from liability. [Foreign Language] Adoption of the remuneration report. [Foreign Language] And we can see a summary of the proposal. [Foreign Language] Voting results. [Foreign Language] The remuneration report has been adopted. [Foreign Language] The meeting should also resolve on the remuneration of the members of the Board of Directors. [Foreign Language] And we can see the proposal and the results of the voting. [Foreign Language] The proposal has been adopted. [Foreign Language] To resolve on the number of members of the Board of Directors. [Foreign Language] The proposal, according to which there would be 9 members of the Board of Directors, has been adopted. Whereafter [Foreign Language], we are about to elect 9 members of the Board of Directors. [Foreign Language] Let's take a look at the video introducing the director nominees. [Presentation]

[Foreign Language] And here, we can see the result of the votes. [Foreign Language] The proposal to the composition of the Board of Directors has been approved. [Foreign Language] We are to resolve on the remuneration of the auditor. [Foreign Language] Based on the voting results, we can state that the proposal has been adopted. We move to election of the auditor. [Foreign Language] This is the proposal and here are the voting results. [Foreign Language] The proposal has been adopted. [Foreign Language] We are about to resolve on the authorization to the Board of Directors to decide on the issuance of shares and special rights entitling to shares. [Foreign Language] Voting results. [Foreign Language] Also this proposal has been adopted. [Foreign Language] This would be an authorization to the Board to decide on the repurchase of the company's own shares. And here, we can see the proposal summary. [Foreign Language] The proposal has been adopted. [Foreign Language] Resolutions on the partial amendment of the Articles of Association. [Foreign Language] We're handling the amendment of the Articles of Association Section 8 and Section 11, and this will be handled separately. Now, we are on the amendment of Section 8. [Foreign Language] The amendment has been approved. [Foreign Language] The other amendment, the amendment of Section 11, is here. And if we take the voting results. [Foreign Language] The proposal has been adopted. [Foreign Language] A proposal regarding the authorization of the Board of Directors to decide on charitable contributions. [Foreign Language] The previous authorization has been used. [Foreign Language] You can see a summary of the proposal itself. [Foreign Language] Also this proposal has been adopted by the General Meeting. [Foreign Language] All matters on the agenda have been handled by the meeting. Thank you to the shareholders and all the viewers of the webcast. The Annual General Meeting is closed.