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

Hello, everyone. Welcome to UPM's Quarter 1 2025 Results Webcast. My name is Massimo Reynaudo. I'm the CEO of UPM. I'm here with Tapio Korpeinen, the CFO of UPM. Today, we will share the main facts and figures of our business during the past months, and we will share some views about how we have prepared to deal with the uncertainty in the current global economic and trading environment. But let's start with quarter 1. We had a good start of the year and improved our business performance compared to the previous quarter. Markets improved in pulp and advanced materials, whereas they continue to be challenging in Communication Papers and decarbonization solutions. Our actions to sharpen competitiveness initiated last year started to bear visible fruits in several areas. Quarter 1 sales were on the same level as last year. Comparable EBIT totaled EUR 287 million or 10.8% of sales, which is 14% lower than in quarter 1 last year. In the quarter, we continue to take actions to improve performance and advance growth. In Uruguay, we have now the whole platform fully operational, including the railway connection from Paso de los Toros to the port terminal in Montevideo. In Raflatac, we continue to measure the measures to improve competitiveness, while the acquisition of Metamark in the U.K. adds to our growth. In Communication Papers, we announced further capacity adjustments and streamlining to ensure continued performance. And finally, we completed our first share buyback program by early April, having repurchased 6 million shares for EUR 160 million. So let's move now to the situation in the different markets. The pulp market gradually improved during quarter 1, particularly in China. Market shipments grew from last year and market prices increased during quarter 1 from the lows of quarter 4. In advanced materials, label materials demand grew in all the main regions. In Europe, the demand exceeded the pre-COVID levels in quarter 1, as you can see in the graph shown here. The demand improved in U.S. as well, but they are the pre-COVID levels were reached already some quarters ago. In plywood markets, the demand improved slightly too, although from a low level. On the other hand, in the decarbonization solutions, markets continue to be challenging. Winter is normally a high season in the electricity market. But this year, it has been rather muted due to the mild winter temperatures and high hydro reservoirs in the Nordic countries. And finally, the demand decrease continued for Communication Paper. But now I'll hand it over to Tapio for some analysis on our results and for the outlook.

All right. Thank you, Massimo. So here, we have the comparison to the previous quarter and year-on-year as well. So on the left-hand side, compared to the first quarter last year, EBIT decreased mainly due to lower sales prices in all business areas. Variable costs increased slightly on group level with higher wood costs, but then also lower costs for many other raw materials. Deliveries grew for pulp and Raflatac, but decreased particularly for Communication Papers. And then on the right-hand side, looking at the sequential difference from first quarter to fourth quarter last year, sales prices were broadly stable. Deliveries grew and fixed cost decreased partly for seasonal reasons. Variable costs in this comparison are up, but this is due to the timing of energy refunds in the Communication Papers that we booked in the fourth quarter last year. Excluding the changes were minor. Cost increased for wood, but then decreased for many other inputs and raw materials. In the comparison period in the fourth quarter, we booked a significant fair value increase of forest assets. And in this graph, it's visible as a negative in the other bar. And then here, we have the comparable EBIT development by business area and starting with the advanced materials businesses, comparable EBIT recovered in Specialty Papers and Raflatac in the first quarter compared to the second half of last year. This was supported by the moderate market demand growth, Massimo mentioned. Raflatac captured its share of the growth and its efficiency measures started to bear fruit. Specialty Papers also benefited from lower production costs. In Fibres, our pulp deliveries grew 21% year-on-year. If we compare to the fourth quarter, both pulp deliveries and average sales price were roughly on the same level. In Uruguay, variable costs decreased, while in Finland, wood costs did increase. Thanks to the streamlined operating model in Finland, we adopted last fall and thanks to our efficient mills, the Finnish platform continued to be profitable in the first quarter. Looking at the decarbonization solutions in energy, the high season for the electricity market was muted by the mild winter and also affected by the high level in hydro reservoirs in the Nordic countries. Market electricity prices were 32% lower than last year. Our average sales price decreased by 15% compared to last year. The annual maintenance shutdown of Olkiluoto 3 started in the beginning of March. In Biofuels, which is reported in other operations, we took a step forward towards restoring profitability with solid deliveries and decreased variable costs. In Communication Papers, deliveries were 17% lower than last year or 3% lower compared to the fourth quarter. Average sales price decreased slightly in both comparisons, thanks to the continuous actions to ensure competitiveness, comparable EBIT held up relatively well. Our financial position is solid. Net debt totaled EUR 2.954 billion at the end of the first quarter, and net debt-to-EBITDA was 1.77x. Operating cash flow during the quarter totaled EUR 289 million, including a seasonal working capital increase of EUR 112 million. The cash flow impact in the first quarter of the share buyback program was EUR 116 million. Before going into the discussion of our outlook, let's look at the increased trade tensions and the U.S. tariffs in particular. On this slide, we show the composition of our U.S. business. In 2024, 14% of our sales was directed to the U.S. Of this, 40% was locally produced and 60% was imported, mainly from the EU. Imports into the United States consisted of Communication Papers, Specialty Papers and some eucalyptus pulp from Uruguay. First, we expect the direct impact of tariffs to our businesses to be relatively limited and the tariffs in general to be broadly passed on through to prices. However, uncertainty in the global business environment has clearly increased. So indirectly, the tariffs may impact demand and trade flows for our products, cause hesitation among customers, disrupt supply chains and weaken consumer confidence in the coming months. The scale of the trade conflict means that there may be negative impacts on economic growth regionally and even globally, and there may be impact in terms of increased currency movements. And on this slide, we summarize UPM's foreign currency exposures. At the end of the first quarter, UPM's estimated net currency cash flows for the next 12 months totaled about EUR 1.6 billion. The largest exposure was to the U.S. dollar worth approximately EUR 1.2 billion. We hedge on average, 50% of the estimated net currency cash flow for the coming 12 months on a rolling basis. In addition, the earnings of UPM's foreign subsidiaries are translated to euros in reporting. We have significant foreign subsidiaries in Uruguay, the U.S. and in China. So then this page summarizes our profit guidance and outlook. We have not changed our guidance range, EUR 400 million to EUR 625 million for the first half of the year. As discussed, we had a good start to the year in the first quarter. However, pulp and electricity prices have so far realized lower than last year, which was visible in our first quarter results. And this makes last year's comparison harder to reach. In the second quarter, we will have significantly more maintenance activity than in the first quarter. We estimate the total maintenance impact in the second quarter to be approximately EUR 90 million. The figure in the first quarter coming mainly then from the Olkiluoto nuclear maintenance, EUR 10 million. So delta there, about EUR 80 million sequentially. Additionally, the second quarter is the low season for energy as we are in the spring flood season, and that seasonally means lower electricity prices in the Nordic and Finnish market area. Obviously, the current trade conflict adds some uncertainty to short-term demand, commodity pricing and also in terms of foreign exchange rates. So taking into account all the seasonal factors and uncertainties and also the current trading to date, it seemed to be more challenging to arrive at the upper part of our guidance range. And now I'll hand it back to Massimo for some summarizing comments.

Very good. Thank you. Well, Tapio discussed some of the current uncertainties we are facing or the world is facing. With our solid balance sheet, competitive business portfolio and broad geographical presence, we are well positioned to face this uncertainty. Since last summer, we have been implementing efficiency and margin management measures that continue to strengthen our competitive position. Besides that, we continue pursuing long-term growth opportunities and work into a portfolio of world-class businesses. But as mentioned earlier, UPM has a diversified business portfolio with a wide geographical spread. And here, you see it represented on the slide. This diversified portfolio of businesses subject to different market trends and cycles, combined with an exposure to economies in different parts of the world than to each with own trends and cycles, enabled good performance delivery and resilience in every circumstance in the past. And we are confident it will serve us well going across the volatility of the next months. This also provides us with a range of attractive growth opportunities in the long term. But now if we look at the situation in some more detail business by business, let's start with Renewable Fibres. Well, in this business, we have now our world-class low-cost platform in Uruguay in full operation. Work continues to optimize and increase efficiency and thus further drive down cash cost. In the medium to long term, we have good debottlenecking potential in that platform as discussed in our Capital Market Day in last September. Meanwhile, in Finland, we have been able to maintain profitable operations at EBIT level despite the tight wood market in the Nordic region and low pulp prices. When we go to advanced materials, our actions to improve competitiveness initiated last year started bear visible fruits in quarter 1. The labeling material markets have now recovered back to above pre-COVID levels and are expected to show healthy growth in the longer term. To put that in numbers, deliveries of labeling materials in Europe grew 1% year-on-year or 13% sequentially from quarter 4. And in North America, they grew 3% year-on-year and 7% from quarter 4. In both instances, we captured a fair share of that growth while improving margins compared to quarter 4. Beside that, M&A are an option to accelerate the growth we are considering when it comes in a synergistic manner. The most recent example is our Metamark acquisition in February, which is now integrated in our operations. Let's look now at decarbonization solutions. In Biochemicals, the task is now to launch a completely new business. We're making good progresses with the commissioning and sequential start-up of the Leuna Biorefining -- Biorefinery. As discussed 3 months ago, we expect the integrated commercial production to start in the second half of the year. And we reconfirm the commercial interest to be high with an opportunity pipeline several times the annual capacity of the refinery. In Biofuels, the short-term priority is the turnaround in profitability. As Tapio mentioned, we achieved a good improvement already in quarter 1 this year. But beside that, more in the medium term, we're continuing the work of validation of growth options in this area and going ahead. Energy is facing low pricing in the short term. However, on a medium to longer term, electricity demand in Finland is expected to grow significantly. And our task is to maximize the value opportunities offered by this development. Communication Paper then is facing or continuing to face a decline in demand and has to continuously make sure its competitiveness remains high. On this base and with this objective in mind, we took decisive actions last year with capacity and cost reductions, and we continue to do so this year as well. In March, we announced the plan to close the Ettringen mill in Germany and to streamline operations in this business. This would reduce our paper capacity once the negotiations are concluded by 270,000 tonnes and will reduce our annual fixed cost by EUR 39 million. Despite these measures, we remain a large global player, the largest in Europe and with facilities also in U.K. and U.S. and our network of mills and the global sales organization provides us a unique level of flexibility when it comes to dealing with potential changes in the global flows determined by the current trade tensions. So -- and in summary, Q1 was a good start of the year. During the quarter and going ahead, looking ahead, the trade tensions have added uncertainty to the global business environment. In this environment, we expect the direct impact of tariffs to be relatively limited. Whilst the economic environment is changing, we maintain firm our priorities that are improving competitiveness across all businesses and through that, accelerate the growth in the mid and long term. Large and running a business of -- which is made of large-scale businesses, delivering each world-class performances remains our objective. With a solid balance sheet and a competitive business portfolio and broad geographical presence, we trust we are well positioned to face the uncertainty ahead. And this concludes the presentation today, and we are now ready for your questions.

[Operator Instructions] The next question comes from Ephrem Ravi from Citigroup.

Just 3 small questions. Firstly, Tapio, if I heard you correctly, you're saying the top end of the guidance looks more challenging. So if we take the midpoint of the guidance range and adjust for the incremental EUR 80 million of cost due to maintenance, you will basically be still slightly lower quarter-on-quarter on an underlying basis. Is that still the way to think about it? That the underlying business will be slightly weaker in Q2, excluding the impact of maintenance at the midpoint of the guidance? Secondly, on the Biomedicals business that you're discontinuing, could you give us a sense of the revenue and EBIT contribution so that we can sort of look for a like-for-like adjustment on the other line? And then thirdly, on the currency hedge that you do, the 50%, is it sort of 50% across all the currency pairs? Or is there one particular currency where you are 100% hedged, maybe the Uruguayan peso or something like that?

Yes. If I'll perhaps start from the kind of last to first on your question. So as far as currency hedging is concerned, so basically, we are looking at this on a currency pair basis. So with have as a policy that we aim to have 50% hedged on each pair. But of course, we are sort of looking at that on a corporate basis. Then on Biomedical, since it was, let's say, still a business in the development sort of early commercialization phase, then the revenue and EBIT impacts are not material. And then in terms of the guidance, so let's say, no new sort of numbers or ranges to give at this point. So as I said, all that I'm sort of pointing out to there is that, again, kind of the trading to date, we have been, obviously, in terms of the energy and pulp prices, sort of trailing behind last year's development. And then we have the sort of seasonal factors plus maintenance going into the second quarter. Obviously, many sort of uncertainties in this world environment, upsides and downsides, which can be meaningful, maybe the sort of balance of risks, obviously, in everybody's minds tend to be on the downside, and that's why I'm saying then that the sort of arriving at the upper part of the range is more challenging in the -- as the world looks like right now.

The next question comes from Charlie Muir-Sands from BNP Paribas Exane.

Just on the Fibre segment, I had a couple of questions, please. So I think you indicated previously that you expected to ship about 300,000 tonnes more out of Uruguay this year. You already did 250,000 tonnes more year-on-year in Q1 alone. So I just wondered whether that meant that the Finnish business is picking back up again or whether this is just a phasing effect or if that's now starting to look a bit conservative? And then secondly, thank you very much for the disclosure you've given so far on currency at the group level. But just in terms of the Fibre segment specifically, could you give us a bit of an estimate as to what proportion of your cost base there is effectively or actually dollar linked as well?

Well, Charlie, let me take the first part of the question, and then I leave the second part about currency for consistency to Tapio. When we talked earlier on about an upside of 300,000 tonnes 2025 compared to 2024, we were referring to the output from the mill, and that was based on the fact that last year, in the first part of the year, the mill was still in a ramping up phase. So it was not a full capacity. So that was referred to increase in production. The other elements are the way shipments go that follows other, let's say, timing and trajectories. But just to separate the things, we were talking about output in Paso de los Toros, not shipment directly.

And maybe I'll comment on the question on the currency. So as far as U.S. dollar, first of all, on this net currency flows, let's say, obviously, mostly related to the pulp business because of the fact that pulp prices are quoted in U.S. dollars. Then on the cost side, 2.4 million tonnes of the capacity is in Finland. The cost base there is in euros. And then in Uruguay part -- in this part of the Uruguay costs in a sense, are sort of dollar-based or linked.

Great. And just a follow-up on the Finnish wood costs. I mean you flagged that they were rising still. Is that still just a lagging effect from the stumpage market? Or are you starting to see the wood cost in Finland creep up again as some of the public data is starting to suggest?

Well, mostly, that is, let's say, of course, now what we see is coming from the lag, obviously, in the first quarter. So -- but of course, what you say also from the public sources is there as well. But what is the impact now? It's coming from, obviously, the lag it takes up to 6 months before actually the cost of wood procured, so to speak, then arrives on the bottom line of the wood consuming businesses.

The next question comes from Lars Kjellberg from Stifel.

I just wanted to dive in a bit to tariffs. When we're talking about probable price increases, I just want to understand the mechanics here. Are you seeking price increases from what you're selling into the U.S.? Or is that something that your importer do? And when it comes to pulp, of course, we saw a very strong demand from China. European demand has been flagging a bit. But are you seeing any demand directional changes from the Chinese side as this turbulence has started to pick up and tariffs start to bite? And the final question I have is on Raflatac. Of course, now you're back to sort of the volumes or above the volumes that were in this business pre-pandemic. Your margins continue to lag. But as you said, you are driving improvements there in efficiency. But when you spoke last, you talked about double-digit margins, you're still a couple of points off that double digit. Should we expect a continuation of that margin recovery and closing the gap to your #1 peer in that business?

Yes. Okay. Let me take the different points. The first one about the tariffs. As Tapio has indicated earlier on, we will apply a pass-through approach to tariffs, meaning that whether it is Finnish products that we, let's say, export from Europe into the U.S. and that are subject to tariffs or whether it is raw materials, which are utilized in the production in the assets, in the mills we have in the U.S., we will transfer downstream the impact that are coming from the tariffs. This is the approach we are utilizing in that case. Then when it comes to the second point about pulp, well, you described what has supported -- sorry, what has happened from a demand standpoint in quarter 1. When it comes to China specifically, as you have mentioned, we have seen a positive development of the demand in quarter 1, which also from a price standpoint has supported or sustained a couple of price increases in the first part of the quarter. Later in the quarter, the resistance to price increases has been stronger. And that's potentially also a reflection of a weakening demand. But we don't go any further here in speculations, even though it is pretty understandable that in the current situation of a trade war between U.S. and China, which is beyond the numbers of the tariffs, it's almost a complete blockade because with this scale of tariff supply, there cannot be any profitable business flowing. It's not surprising that there will be, let's say, prudence in the consumers' behaviors and prudence into the buyers' behavior. So we'll see how the situation will unfold. It will hardly be sustainable for the long term. But at this point in time, there is this suspended -- a bit of the suspended atmosphere with some impact on demand has. The third point about Raflatac, yes, we indicated margins, margin ambitions. And to be precise, the EBIT margin ambition to be in the double-digit range. That remains our objective that we reconfirm as an objective. Getting there is going to be a journey. Of course, we've been talking a couple of times of volatile environment and so on. But I would say that in normal conditions, that double-digit target may be reached into next year or towards the end of the year. But we'll see more during time. It will be a progressive improvement over time.

And just one follow-up, if I may, on your U.S. domestic business, where you also have labels, of course, right? And as you push higher prices for what you send into the U.S., including label papers, are you finding an ability to actually raise your domestic prices? And if so, would that actually give you benefit on the [ 1 mill ] still operate in Communication Paper within the U.S.

Yes. I would say, as Tapio has well described it before, we are managing the direct implications of the tariffs, which is we are protecting our margins by passing the increases through. It is true as well that we are not alone in the market. And in the market, there are both domestic subjects, and we are one of them and other players from the outside. But this is when different companies will implement their strategy, and this is where the flows may change, the market share can move. We stay positive given the competitiveness of our position over there, but this is where we enter into the second or third order of implication of tariffs, which are very difficult to assess.

The next question comes from Robin Santavirta from Carnegie.

Can I just ask, you also have quite extensive local production and sales in China. You alluded to the point that there's a bit of a standoff in terms of pulp demand or pulp imports into China. What is the local atmosphere when it comes to the pulp and paper industry in China as it stands now? Is the local demand of pulp end products? Has that also weakened? So just curious to hear your thoughts on what is going on in China as you're also a big local operator there?

Yes. Let's say, in the segments where we are present in China, we have commented earlier on during the presentation, we have seen a rather positive development of the demand in China in quarter 1. I'm referring here to labeling materials and products in that value chain. Demand has been sustained also, for example, for fine paper that we are producing and selling over there. So I would say when it comes to the first quarter, the demand development has been pretty, pretty positive. The rest is more about uncertainty that has developed towards the end of the quarter or the beginning of April as a consequence of these different waves of tariffs that have stuck on each other. But that's, I would say, it's too soon to extrapolate trajectories out of it.

But is it fair to say now the sort of day-to-day business environment has changed quite significantly to what you saw in Q1? I understand it might be temporary, but what you see at the moment is a bit different than what you saw in Q1, I would assume?

Well, it's not the way I have characterized it. There's a probability that there will be an impact of this situation. But I would say there, my speculations are as good as yours or anybody else because we're really venturing when we go into a very new situation. So I can just restate that in quarter 1, demand has been pretty good.

I understand. The second question I have is related to the statement you have on actions to improve or sharpen the competitiveness of the company and they have started to bear fruit. Can you detail what are they exactly and which segments do they impact? And how should we sort of expect those to have an impact on profitability going forward?

Yes. I would say the segments that are impacted are a bit old because every business, every unit is pursuing competitiveness improvement objectives. But just to quote some of the of the most significant one and also referring to public information we disclosed about that. Let's talk about Raflatac. We have streamlined the organization as of the summer last year, moving to a regional model, delayering the organization, increasing, let's say, market proximity and agility and taking cost away with it as well. Always in Raflatac, we have announced, I believe it was November last year, the closure of the Kaltenkirchen mill in Germany and the move of the production in other mills where there are lower cost. If I refer to Communication Paper, well, we'll just talk about what we have announced in March to protect the competitiveness of the business in a market where demand has declined or is continuing to decline. If I talk, for example, about pulp and pulp in Finland, we have changed the way we operate the business in the fall last year. And basically, we have moved from, for example, managing the wood sourcing timber and pulp as different units, everyone pursuing our own objective and maximizing our own objectives to move them to an integrated management that aims to protect and amplify the profitability of the pulp business as a whole. And by the way, doing that, we have also streamlined our operations. We have changed the way we run our pulp mills in Finland, and we are running them for profit, not for capacity. What it means is that typically, you run a pulp mill 24/7 at full speed, at full capacity. But in the situation, the Nordic countries are in of a high wood cost and wood scarcity, we have opted for a more agile approach that aims to, let's say, run the production levels that aim to -- that allow to optimize the profit and minimize the impact of wood cost. So these are a number, but several of the concrete actions we have implemented already to sharpen the competitiveness in the different businesses.

The next question comes from James Perry from Citi.

I'd just like to ask again about China, sorry. I know you mentioned the good demand in Q1, potentially slowing in Q2 and the fading price momentum. But would you be able to comment at all on what you're hearing on the ground regarding the dynamics in relation to the Chenming situation? And how material has that been to price discussion, do you think? And do you think the pulp market participants that are currently expecting a return to full Chenming capacity?

Well, I will refrain from talking to -- about another company or speculating about the future. But at least if we look to the situation in the past months, well, to put some numbers together, I believe the overall capacity of Chenming is in the scale of 10 million plus -- 10 million tons plus between pulp and paper of different types. And I believe it's a public fact that some sort of 70% of that capacity has been off the market until recently. I believe referring to public information that 1 or 2 line have activated. I'm not sure I remember right, but it's public information you made it as well in March or April. But still, the majority of that capacity to my knowledge, is still down. So as I said, without speculating on their situation, it is significant volumes that have not been on the market during this period and surely have helped to balance offer and demand and also helped the positive price development in a number of categories.

The next question comes from Patrick Mann from Bank of America.

I just wanted to follow up quickly on the -- what you're talking about the increase in shipments versus production in the Fibre segment. So if I heard you right, you were saying production would increase by around 300,000 tonnes. But obviously, last year, when it was ramping up, I assume some of that production wasn't being shipped. It was sort of stocking working capital. Is it possible for you to either give us how much of production last year went into that working capital balance? Or alternatively, give us what you think shipments -- the increase in shipments could be this year given the increase in production and the fact that sort of working capital is not absorbing as much anymore? That's the first question.

Well, let's say, again, this sort of like Massimo was already, earlier, sort of referring to this 300,000 tonnes of additional volume production and/or shipments is basically a function of that sort of trajectory or sort of a progress in terms of ramping up and running at sort of full capacity for the full year now this year in terms of, let's say, this is the sort of inventory movements and so on. No comment on that. We don't sort of accumulate inventory as such. Obviously, what is also impacting in a sense this kind of overall shipment figures and delivery figures on a quarterly basis is that, again, Massimo referred to kind of the way that we operated the finished pulp mills last year, not to capacity, but to the profitable tonnes, meaning that then we did take some downtime to sort of optimize the result, which worked well during last year. And so that obviously had some impact on the Finnish volumes this year, then we have had a good run in the Finnish operations again. So let's say, not possible to sort of go into the detail of inventory movements when we have obviously the whole platform of Finland and Uruguay combined here.

Okay. That helps. Yes, it's more complicated than I heard initially. And then the second question, I just wanted to ask on Communication Papers. So you kind of said at the beginning of the year that you were expecting us to return to a structural decline, and that's what we've seen. And I appreciate you've just said or you're just taking out 270,000 tonnes. If you look at your outlook for the industry, where your utilization rates are, where the industry utilization rates are, I mean, when do you think you'll need again to potentially make further closures to match capacity to demand?

Well, this is not something we -- well, we, of course, always develop a number of different scenarios and hypothesis that is normal. I believe every business does it. But that is not something we -- how can I say, disclose as possible scenarios, right, because we are a player in that industry and operating rates depend by deliveries, which depends by demand. And so it's a function of many different factors, including optimizations or exit from other companies, which may take place in the market. So sorry, I cannot be precise or sharp with the question, but I understand you imagine also the complexity of the environment.

The next question comes from Brian Morgan from Morgan Stanley.

I was wondering if you can just dive into biofuels for us a little bit. You're talking about taking a step towards restoring profitability in that business. Could you dive into that a little bit about maybe where you are in terms of operating rates, how prices have developed, how are you finding imported biofuels in Finland? And maybe just give us some sort of indication about when we might expect profitability to emerge.

Well, yes, as I said, we have kind of started to turn the corner there. Maybe overall, one can say that we haven't seen a sort of significant or major sort of turnaround in the market as such. So limited help from the market side. So primarily, again, it is coming from our own actions and sort of factors in a sense are like we have described earlier already our feedstock costs and therefore, variable costs have been trending down as the sort of market price for our feedstocks has been coming down already for some time, and it's arriving in a sense in the bottom line in terms of improved cost base. And let's say, our sort of operating rate has been also, and rate of production has been good in the first quarter. So operationally, that obviously has helped as well. So in that sense, I would say that the kind of improvement is largely driven, obviously, by our own actions. And in the meantime, let's say, being a nimble player in the market, then we try to find the pockets which are the better price pockets for our output.

And just a follow-up, if possible. What sort of -- are you able to give us any color on what sort of OpEx you're carrying within the division from Leuna?

Well, I'd say nothing further to update other than what we have disclosed already in the sort of previous quarterly presentation.

The next question comes from Pallav Mittal from Barclays.

A couple of questions. Firstly, on the Fibre business, you have highlighted resistance to further pulp price increases and weakening demand towards the end of first quarter. Can you help us understand the discounts that you are offering to customers as far as the pulp business is concerned and across Europe, Americas and Asia? And then secondly, on capital allocation, the share buyback program of EUR 160 million is now completed. Considering your balance sheet and the current stock price, how should we think about more returns to shareholders in 2025?

Yes. Well, when it comes to Fibres, we don't disclose our discounts to -- or our pricing levels, as you can imagine, whether it is in China, Europe or other parts of the world. When it comes to capital allocation, as you said and as we commented before, the share buyback has been completed. This is the first share buyback we have done. And now it's completed. I mean, we characterize it like the first time we do a share buyback, which means that there may be potentially other opportunities in the future. But I would say that for now, it's done. And in the current environment, we do attach, and we believe it is extremely important to have a solid balance sheet that we have and we want to maintain. So that is going to be the priority going forward.

The next question comes from Andrew Jones from UBS.

Just on the Fibre business, I'm looking at the EBITDA number, which is close to EUR 200 million. And if we were doing EUR 280 million as a cash cost in the Uruguayan system, the first quarter pulp price just in Uruguay would be about EUR 250 million, implying like Finland will be significantly negative. Now from what you're saying, you're running at capacity, the rail lines in, yes, there's probably still some optimization to go. But it sounds like you should be getting close to that guidance number based upon the progress so far. So I'm kind of wondering where the cash costs are now or where they were in the first quarter? How much you think they can improve going forward with that optimization and potential debottlenecking? And how much of that EBITDA is coming from Uruguay now? And what's the profitability like of the Finnish operations?

Well, maybe if I'll take the last part. So Finnish operations are contributing positively to the EBIT of the Fibres business. Like we said, they are profitable. Our definition of profitability is not positive EBITDA. So obviously, the Finnish operations were positively contributing to the EBIT figures as well. And then we have already earlier sort of given some sort of, let's say, flavor in terms of the cost improvement that we expect in the Uruguay operations during this year, $25 per tonne or more.

$25 compared to -- is that year-over-year? Or is that compared to where we are now?

Year-over-year.

Year-over-year. Okay. In the Uruguay system. Okay. And it sounds like that still wouldn't be reaching the EUR 280 million. So I guess what's changed in your sort of thinking compared to when you set that guidance?

I don't know anything has changed. We have said earlier as well that, let's say, the sort of EUR 280 million figure is still then kind of beyond this year, obviously, we will get closer to it as the big steps of getting the mill ramped up, getting the whole platform up to use and getting the kind of Uruguay operations as a whole optimized. Those are starting to be behind us or are behind us actually. And now we're sort of getting the efficiencies up with a full run for the full year. That will take us close, but then there is still further work to be done to sort of get to the target figure, including also kind of the improvement coming from the plantations that have been developed during the years and are now taken -- have been taken to full use when the Paso site started up.

Just for the sake of clarity, we said EUR 280 million, we have restated EUR 280 million. We didn't see EUR 280 million would have been reached in quarter 1, 2025. As Tapio has explained well, we are in an optimization phase. The progression toward that target is not a straight line. It's a curve, bigger steps or the bigger steps are taken away in the first phase and $25 per ton is a bigger step that we will be materializing this year compared to last year. Other steps will come. But again, repeating what Tapio said or what we said earlier on, this is an objective that will be achieved over time through a number of successful -- sorry, subsequent optimizations and taking away the last dollars will take quite some time still.

Okay. That's clear. And just for clarity on the volume shipped to the U.S. from outside the country. Could you just tell us what that is in terms of what that was in 2024 in terms of tonnage for Communication Paper for labels. Could you just break down what those flows were?

No, we don't have those sort of details to disclose. But obviously, let's say, given the scale of the business, Communication Papers, obviously, both for the mill in Blandin in Minnesota, but then also for the exports out of Europe to the U.S. is kind of the largest business in a sense, but then Specialty Papers and Raflatac are kind of obviously sizable as well. Then the sort of exports of pulp from Uruguay is smaller part of the total.

The next question comes from Joni Sandvall from Nordea.

Maybe a follow-up on advanced materials, especially Raflatac. You said that you have taken actions since last year. So how much of these actions are currently visible? And how much further support should we expect during '25? So I'm just trying to get the grasp of the run rate improvements here.

Yes. Without getting into numbers, some are visible, and we also mentioned it are visible in the quarter 1. A part still is to be materialized and will materialize during the rest of the year. So it's not all banked in.

8 Okay. Okay. And second question maybe related to Paso de los Toros debottlenecking potentially. You have the maintenance coming up now in Q2. So could you give any indication how much potential is there after the maintenance?

Well, this is not per se a debottlenecking step. Just to recall things, this maintenance shut happens 24 months after the start-up of the mill. We had a maintenance shut last year in the same period. Both these 2 shuts at a distance of 12 months are due to basically releasing and discharging responsibility from suppliers on the parts they have retained -- they have responsibility upon for 12 or 24 months, which is also a good opportunity to remind that the next maintenance shut will be then in 18 months from now, therefore, with the usual cadence of maintenance in a pulp mill. Yes. Then I would say, what we have indicated like debottlenecking earlier on will come fundamentally to [ true ] phases. One is to push current production capacity throughput, let's say, beyond the nominal capacity that we have reached. And that's going to be a progressive activity that will happen, let's say, directionally over the next couple of years. While doing this and pushing it further, we will be hitting a number of bottlenecks that may require, let's say, investments in parts. So -- and that will happen most likely in conjunction to one of the future maintenance shots. But this is too soon to speculate on that because we still need to go into the first phase of this debottlenecking. Thank you, Joni. And with this, we have used all the time we have planned for this call and even a bit more. I thank you all for your participation today and for your questions, and I wish you a nice day.

Thank you.