October 24, 2019 / 10:35 AM / 7 months ago

UPDATE 1-Finland's UPM says CEO to stay in role, Q3 profits slip

(Rewrites throughout)

HELSINKI, Oct 24 (Reuters) - Shares in Finnish pulp and paper maker UPM rose on Thursday after the company said its long-serving CEO would stay with the company past retirement age, overseeing its $3 billion investment in a pulp plant in Uruguay.

UPM also said underlying operating profit (EBITDA) for the July-September quarter fell 8% to 455 million euros ($506 million) as falling pulp prices outweighed gains from cost cuts. That was, however, a better performance than the 439 million euros expected by analysts in a Refinitiv poll.

Shares in the company hit their highest in 12 months and were up 3.3% in mid-day trading.

UPM said it had seen modest demand growth in all areas, except in units producing paper for newspapers and magazines.

“We view solid earnings delivery, net cash balance sheet and transformational project upside as supporting our view that UPM remains a core long-term holding in (the paper and packaging sector),” Jefferies analysts, who have a “buy” rating on the stock, said in a note.

UPM said Chief Executive Jussi Pesonen, who took the helm in 2004, would continue in the role even though he was eligible for retirement in November 2020 when he turns 60.

Jefferies’ analysts said the news was positive and removed near-term management continuity risk.

UPM said the investment in Uruguay would grow its current pulp capacity by more than 50% and lead to a “step change” in the scale of the pulp business and the company’s future earnings.

UPM’s plans in the region — home to several wood pulp plants thanks to a beneficial climate for eucalyptus trees — are part of its shift from a declining print paper market to pulp, which is expected to grow in line with rising demand for tissue and packaging board.

$1 = 0.8978 euros Reporting by Anne Kauranen and Tarmo Virki; Editing by Kirsten Donovan

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