UPM-Kymmene Oyj, Europe’s second-largest papermaker, rose the most in 15 months after setting a profit improvement target as the company adapts to the long-term decline in demand for newsprint.
The shares advanced as much as 7.7 percent, the most since April 26, 2012. UPM gained 7.2 percent to 9 euros at 11:37 a.m. in Helsinki trading. Volume traded was more than three times the three-month daily average.
“We are determined to change UPM,” Chief Executive Officer Jussi Pesonen said in a statement today. “We will address the competitive challenge in mature European businesses and drive profitable growth outside Europe and in bio-refining.”
UPM has invested 150 million euros ($199 million) in a bio-refinery in Finland that will produce diesel for transport using waste from its pulp mills starting next year. Earlier this year, UPM announced 860 job cuts and reductions in European paper capacity. Papermakers including Stora Enso Oyj and Metsae Board Oyj have also sought alternative sources of revenue to ease dependence on the declining paper business.
The full effect of its 400 million-euro profitability program will be seen by the end of 2014, UPM said today in the statement. Further goals include simplifying the company’s business portfolio and uncovering asset value, which “may involve changes in ownership structures,” Pesonen said.
UPM also announced a change of structure as well as assigning heads to most units as of Nov. 1. The company identified profit improvements of 200 million euros in existing businesses, which don’t include capacity closures at this time.
UPM’s second-quarter profit before tax declined to 128 million euros from 221 million euros a year earlier, the company said. That compared with a 110 million-euro average estimate by 8 analysts in a Bloomberg survey. Net income fell to 114 million euros from 208 million euros a year earlier.