MADISON, Maine — The world’s largest producer of magazine-quality paper says its pending acquisition of Madison Paper Industries’ parent company will boost its profitability in the paper market and increase its already-strong financial earnings in other sectors.
Finland’s UPM-Kymmene Corp., which is in the process of acquiring the Madison mill’s parent, Myllykoski Corp., brought its total profitability in 2010 back to a pre-recession level, according to financial statements released by the company Wednesday.
While UPM’s pulp, energy and label paper businesses excelled in 2010, the profitability of the paper business was weak, according to Jussi Pesonen, UPM’s president and chief operating officer. Paper deliveries increased, but the business operated at a loss due to “significantly higher” wood fiber costs, Pesonen said.
UPM believes consolidation of European paper businesses — including the acquisition of Myllykoski — is the answer to boosting profitability in the paper sector.
UPM’s financial statements show the company off to a good start in 2011, after its paper prices increased 6 percent from the previous quarter.
The company’s operating profit in October through December, excluding one-time transactions, increased 14 percent over the same 2009 quarter, to $293.5 million. The company did better than expected; its profits overshot a Reuters’ news service forecast by 12 percent.
The increase, however, included $118 million from a peak in wood prices in Finland and changes in harvesting, according to a Reuters’ article released Wednesday.
Overall in 2010, UPM’s sales showed a solid recovery and increased 16 percent.
“With higher production volumes, we were able to take full benefit of our early efficiency improvements and bring profitability back to a pre-recession level. This is a remarkable achievement in the continuously challenging operating environment,” Pesonen said in a statement.
Consolidation of the European paper market will allow UPM to improve its cost structure.
The “Myllykoski acquisition is a major strategic opportunity for our company,” according to Pesonen.
The company says its — and the paper industry’s — outlook for 2011 is positive.
“The price increases we achieved at the beginning of the year will support the necessary margin recovery and to catch up last year’s cost development,” Pesonen said.
He cautioned, however, that growth in mature European and North American markets would be slow.
Regulators with the European Commission are currently reviewing the $1.2 billion pending sale of Myllykoski and its companion company Rhein Papier GmbH to determine if it would give UPM too much influence over the European paper market.
Myllykoski, based in Finland, has owned the Madison mill for 32 years. It also owns six other publication paper mills in Germany and Finland. The New York Times company owns 40 percent of Madison Paper, in partnership with Myllykoski.
Copyright (c) 2011, Morning Sentinel, Waterville, Maine
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