So, dear friends,

In the spirit of sustainability, I’d like to introduce you to another company:

UPM Kymmene

FI4000603337

UPM-Kymmene Oyj is a Finnish manufacturer of paper, pulp, and wood products and is one of the world’s leading forestry and paper companies. All of the group’s products are made from 100% renewable raw materials.

Key Figures:

P/E Ratio 2021e: 14.2

P/E Ratio 2022e: 17.4

ROCE: 8.64%

Debt < 4x EBIT: 0.4! Debt is virtually nonexistent/irrelevant

Gross margin: approx. 32%

Net margin: approx. 19% (Q3 2021)

Goals: Mitigating climate change and sustainable forestry (two trees are planted for every tree felled), as well as a future free of fossil fuels.

According to the Q3 2021 report:

"UPM began the basic engineering phase of a next-generation biofuels refinery in January.

UPM joined The Climate Pledge in February, committing to meet the Paris Agreement targets 10 years ahead of schedule."

Segments (non-exhaustive):

Biofuels

Energy (low-emission electricity for the Northern European market)

Biocomposites

Biochemicals

Biomedicine

Bioforestry

Specialty/Printing/Communication Paper

Pulp/3D Bioprinting

UPM has not been a growth company in the past. Revenue is also dependent on the price of wood (see 2020, when the price was low), which naturally rose this year due to inflation. UPM benefits from this, in part through its own production. Despite all this, UPM is a cyclical company. However, UPM seems well-positioned for the future.

Competitors: For example, Svenska Cellulosa or Holmen AB.

Conclusion: UPM is very well positioned. The balance sheet looks very strong! Nevertheless, there is competition, especially in the north. For some dividend hunters, UPM is a gem. However, I also see long-term potential in the stock price, even though we’re talking about a cyclical stock in the value sector here and not a growth company. You should be aware of that. Anyone who values sustainability and wants a stable company won’t do too badly here either.

Disclaimer: I am personally invested in this stock.