January 30, 2020 / 8:45 AM / 18 days ago

UPDATE 2-Finland's UPM invests 550 mln in biorefinery in Germany

(adds biorefinery investment, details)

HELSINKI, Jan 30 (Reuters) - Finland’s UPM said on Thursday it would invest 550 million euros in a new biorefinery in Leuna, Germany, after beating market expectations with its fourth quarter earnings.

“The biorefinery will produce a range of 100% wood-based biochemicals which enable a switch from fossil raw materials to sustainable alternatives in various consumer-driven end-uses,” UPM said in a statement.

Since 2013, the company has invested in research to develop new wood-based products to complement its main pulp and paper businesses.

The biorefinery will convert solid wood into biochemicals such as bio-monoethylene glycol, which has several consumer product applications such as textiles, bottles, packaging, detergents and de-icing fluids.

“The global glycols market represents more than 30 million tonnes in size and is expected to grow annually by approximately 4%,” the company said, adding the existing market supply was practically all based on raw fossil fuels, namely oil, natural gas and coal.

Earlier on Thursday UPM warned of lower first-half earnings due to weak paper prices as it reported a smaller-than expected fall in underlying operating profit for final quarter of 2019.

UPM’s underlying operating profit (EBITDA) for the October-December quarter fell to 442 million euros ($490 million) from 473 million a year earlier, but beat the 408 million expected by analysts in a Refinitiv Eikon poll.

“Our sales decreased by 10%, mainly due to the fall in pulp sales prices and graphic paper deliveries,” CEO Jussi Pesonen said in a statement.

UPM said it expected comparable operating profit in the first half of 2020 to be significantly lower than a year earlier due to lower prices, although these would be partially offset by reductions in variable costs.

It forecast a recovery in profits in the second half.

UPM peer Stora Enso on Thursday reported a larger-than-forecast fall in underlying quarterly profit for the October-December and forecast a weaker-than-expected first quarter.

UPM shares were up 3.3% at 1040 GMT while Stora was up 1.2%.

$1 = 0.9014 euros Reporting by Anne Kauranen and Tarmo Virki; editing by David Evans, Jason Neely, Kirsten Donovan

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