April 26, 2019 / 7:41 AM / 23 days ago

UPDATE 2-Finnish pulp firms press on with multi-billion euro investments

* Metsa Fibre unveils plan for 1.5 bln euro Finnish pulp mill

* UPM reports progress in 2 bln euro Uruguay mill project

* Final investment decisions likely in 2020 (Releads with pulp mills, wraps Metsa)

By Tarmo Virki

HELSINKI, April 26 (Reuters) - Finnish pulp and paper maker Metsa Group announced a multi-billion euro expansion of its facilities on Friday, joining sector peer UPM in ramping up investments as higher prices drive growth across the industry.

Metsa Group’s Metsa Fibre has launched a pre-engineering phase for the construction of a 1.5 billion euro ($1.67 billion) bioproduct mill in Kemi, northern Finland, it said, with a final investment decision due in mid-2020 at the earliest.

Financing plans are also due later, it said. The mill would have annual pulp capacity of 1.5 million tonnes, and would produce several other bioproducts.

Publicly traded Metsa Board, which owns 24.9 percent of Metsa Fibre, said it also plans to invest 300 million euros in revamping its Swedish pulp mill in Husum, while Metsa Fibre will also invest 200 million in a sawmill in Rauma, Finland.

Elsewhere UPM said preparations for a new 2 billion euro pulp mill in Uruguay were proceeding, though some work was still necessary before an investment decision could be made.

“A lot of progress has been made in many areas,” Chief Executive Jussi Pesonen told an analyst call.

UPM said several important conditions stated in the investment agreement are still pending. A railway contract, labour protocols, and conflict mitigation regulation are all critical drivers for the final decision, it said.

The company expects preparation works to be finished by November this year. The mill would have annual capacity of about 2 million tonnes of eucalyptus market pulp.

Pesonen said the mill would be a key driver of growth for UPM’s pulp business and also for group earnings.

In the January to March period, UPM’s operating profit excluding one-offs rose 5 percent to 374 million euros, a touch below the 379 million expected by 9 analysts in a Reuters poll.

“In five of our six business areas, prices increased, more than offsetting the higher costs and keeping overall margins healthy,” Pesonen said in a statement.

UPM said it expects its business to continue performing well in 2019, with demand increasing across all business units, apart from the one producing newspaper and magazine paper.

Its executives said they were unworried by pulp capacity expansion in the industry. “Demand will grow as it has been growing quite steadily,” Pesonen said.

Chief financial officer Tapio Korpeinen added: “We believe the demand-supply balance will be healthy.” ($1 = 0.8980 euros) (Reporting by Tarmo Virki; editing by Jason Neely, Kirsten Donovan and Jan Harvey)

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