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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to UPM's Quarter 1 2020 Result Webcast. My name is Jussi Pesonen, I'm the CEO of UPM, and I'm here with our CFO, Tapio Korpeinen.
Hello to everyone.
First of all, UPM made a solid results during the quarter. In January, we made an investment decision for the first-of-its-kind biochemicals refinery in Germany. This investment opens totally a new and exciting market for UPM's future growth and value creation.In January and February, we were affected by the strikes in Finland. Our Finnish pulp and paper mills were down for 2 weeks, and our Finnish plywood mills and sawn timber mills were down for 4 weeks. The big news during the quarter was, obviously, the COVID-19 outbreak, which was already an epidemic in China starting in January and then quickly turned to a internal -- sorry, into a global pandemic.Specialty Papers was the first UPM businesses faced the situation having the large operations in China. With extensive precautions and the proactive and diligent response of our employees, we were able to keep our employees safe, run our operations without interruptions in China. And that, by the way, continues today.As the situation evolved, we quickly implemented similar extensive precautions elsewhere as we -- as well as protect the health and safety of our people to ensure the business continuity. All in all, the pandemic didn't have any material impact on our operations in Q1.However, pandemic and the related containments measures and lockdowns around the world have significantly increased uncertainties for the rest of the year. But UPM is well prepared for these uncertainties. We have the agile and effective operating model, and this is, by the way, a -- once again, a great place to show how effective it is. And it is in place to adapt to changes in the business environment. Our businesses are competitive ones.Our financial position is exceptionally strong and in a good shape. We can continue to implement our strategic growth project during these uncertain times. We could also pay a -- our dividend as planned in April. So we are in a good shape.Turning to the next page, and let's look at our results. UPM's Q1 sales decreased by 15% from that of last year. There were 3 main drivers for this. First of all, 30% lower pulp prices, 8% lower paper prices and 13% lower graphic paper deliveries, of course, partly due to strike in Finland. Our -- as a result of lower sales prices, our comparable EBIT decreased by 26% from record first quarter EBIT last year. So our EBIT was EUR 279 million, and EBIT margin was 12.2%.Our return on capital employed was 10.2%. And this, I think, is a very solid quarter, having in mind that the EBITDA margin was also 17%. I'm particularly pleased to see consistent margin improvement actions bearing fruit in Raflatac and Specialty Papers. These 2 businesses made a record quarter and record quarterly result in Q1. At the same time, Communication Papers achieved nearly the same result as last year despite of 20% lower top line.But ladies and gentlemen, at this point of time, I will hand over to Tapio for further analysis of the result, and then we will have some more discussions around COVID and 2020. Tapio, please.
Thank you, Jussi. So here, we have the waterfall slide comparing the quarter to first quarter last year and sequentially to the fourth quarter last year. On the left-hand side, if we start from there, as Jussi said, comparable EBIT decreased due to lower sales prices in all of our businesses. But we were able to compensate for more than half of the price impact with lower variable costs. Delivery volumes decreased. However, this impact, we could fully offset with lower fixed costs. The strikes in Finland affected our deliveries, but also decreased fixed costs. Finally, changes in currencies had a small positive net impact on comparable EBIT.And then on the right-hand side, compared to the fourth quarter last year, EBIT decreased due to lower sales prices there as well. Sales prices decreased by 4% sequentially for both pulp and for paper. In the first quarter, there were no fair value changes in our forest assets. The increase in variable costs and decrease in fixed costs you see here are both mainly seasonal in nature comparing first quarter to fourth quarter.And then here on the following page, you have the EBIT development by business area quarterly. On the right side, you see the strong performance of Raflatac and Specialty Papers. Both businesses have been working consistently to improve margins and to develop the product mix. Both have been also actively reducing fixed costs. These actions, combined with the robust consumer demand in the first quarter, resulted in record EBIT in both businesses. Of course, Specialty Papers also benefited from the low pulp prices.Communication Papers' EBIT normalized from the fourth quarter last year due to lower paper prices and seasonal factors. However, its EBIT decreased only slightly from the first quarter last year. This is a very good achievement given that the top line for Communication Papers decreased by 20% year-on-year.Graphic paper demand in Europe decreased by 8% in the first quarter, which is relatively consistent with the slow economy in Europe during the first quarter. UPM deliveries were impacted by the strike in Finland, so therefore, decreased by 13%.Energy performed well in highly exceptional weather conditions and volatile energy markets. In the first quarter, we had exceptionally warm, wet and windy conditions in the Nordic area. Plywood achieved stable results despite only 2 months of operation at the Finnish mills.Biorefining reported stable results compared with the fourth quarter. Pulp demand from our customers continued on a good level even in China. Pulp prices decreased 4% from the fourth quarter, and production at the Finnish mills was affected by the strike. Biorefining EBIT was significantly lower than last year due to the 30% lower pulp price.Our first quarter operating cash flow was EUR 137 million, as working capital increased by EUR 212 million. This working capital increase is seasonal by nature. Typically in the first half of the year, we tie up cash into working capital, but then also the starting point reflecting -- at the beginning of the year, reflecting the fact that we had quite strong cash flow, record strong cash flow in the fourth quarter last year, including a large release from working capital in terms of cash.So our financial position at the end of the first quarter and at the moment is exceptionally strong. We have EUR 405 million net cash in the balance sheet, including -- or kind of accounting also for EUR 570 million in leases. Our liquidity totaled EUR 2.2 billion at the end of the first quarter. We have no financial covenants, and we have no meaningful debt maturities until 2027. All this considered, we are pleased that we could proceed with our AGM at the end of March with special arrangements, ensuring both safety and shareholders' rights, also with the support of our shareholders. So this way, the AGM was able to decide on all the important governance items, and we were able to pay the EUR 1.30 per share dividend as originally scheduled.And this slide just shows you our good maturity situation. You can also see here our new 5-year EUR 750 million sustainability-linked revolving credit facility.In the current conditions, UPM does not provide an outlook for the time being. The COVID-19 pandemic and the related lockdowns around the world mean significant uncertainty for the rest of the year.Looking at safety and business continuity, we have implemented extensive precautions to protect the health and safety of our employees and to ensure business continuity. Despite these efforts, it's possible that during the pandemic, the operation of some of our units or the supply chain or logistics could be temporarily disrupted.Looking at the demand for our products, many of our products serve essential everyday consumer needs fundamentally, and therefore, may see relatively resilient demand during the crisis. These products include pulp, specialty papers and self-adhesive label materials.Demand for graphic papers, plywood and timber is likely to be affected by the pandemic-related lockdowns and the following recession. The lockdowns limit a wide range of services and retail that use printed advertising and obviously also impacts or affects work at offices. This is likely to have a temporary negative impact on graphic paper demand.We at UPM, we are planning to use shift arrangements temporarily, also reduced working hours as required to adjust to different scenarios as they unfold. But all in all, we are in a very good position, given our exceptional financial position and our agile and efficient working model.The pandemic and the required health and safety measures had challenged the large investment projects as well as for maintenance shutdowns. We are proceeding with the pulp mill project in Uruguay and with the biochemicals project in Germany with strict health and safety controls.Just to give one example, new workers entering the Paso de los Toros pulp mill construction site are being tested for COVID-19. Despite these measures and efforts, some changes to detailed time line of the projects are possible during the pandemic. But so far, the projects proceed in line with the planned start-up time line.Looking at maintenance, we have moved the maintenance shutdowns at the Kaukas and Pietarsaari mills from the second quarter to the fourth quarter this year. Also, the maintenance shutdown at the Olkiluoto 1 nuclear power plant in the second quarter will be shorter than usual. Due to the COVID-19 pandemic, fuel loading into Olkiluoto 3 reactor will not take place in June 2020 as planned.And now I'll hand back over to Jussi for some words on our strategic projects.
Thank you, Tapio. UPM's long-term value creation is driven by our spearhead of growth. These are sustainable businesses with strong long-term fundamentals for demand growth and a high barrier to entry. Due to strong financial position, we can continue implementing our strategy and our strategic growth projects.We have today reported a record earnings in Raflatac and Specialty Papers. Currently, we are ramping up our latest Specialty Paper expansion in Germany and in China. We continue to see attractive growth opportunities in the specialty packaging materials over the long term. Our highly competitive pulp mill investment in Uruguay is proceeding in line with the planned start-up schedule. Once up and running, it represents a step change in UPM earnings.Engineering and planning are ongoing for the biochemical refinery investment in Germany, in line with the schedule. This is also an attractive investment, which is opening a totally new markets for UPM's long-term growth. Development work continues regarding our next steps in biofuels as well.And finally, we will keep our foundation of this house in good shape and UPM. We will take actions as required to take care of our competitiveness and cash flow, both short term, midterm and long term.The next page is a reminder and reminds you of the main points of the Uruguay investment. I'm not going to go in details, but this is going to be a world-class pulp mill, which will be implemented as planned. This is an attractive investment in various market scenarios due to its low cost position. The long-term fundamentals of the pulp business are attractive and intact.Most of us cannot travel these days. So here, we have provided you a postcard from Uruguay showing of where we are in developments. I, myself, visited Uruguay last time, early in March just before the pandemic started to expand in Europe and becoming a pandemic.On the left, you see the pulp mill site in Paso de los Toros. Fencing and lighting works have been finalized while earthmoving and roadworks are ongoing. And then, of course, the civil construction work are commencing.On the right, you can see the pulp terminal side, the Montevideo port. The first phase of the grading and the backfilling -- the dredging and backfilling of the area have been completed. Pier construction and piling are commencing as we speak. In the middle, you can see some of the several sites for housing for the permanent and temporary employees.Similar, this slide summarizes the main points of the biochemicals refinery investment in Germany. We will supply a sustainable 100% wood-based alternative for fossil raw materials in various consumer-driven end uses in commercial scale. It is a major milestone in UPM's transformation, opening totally new businesses and markets for the future growth. We also expect this to be an attractive investment area for the future as well.Our CapEx guidance is the last page actually in this, for the year has been unchanged at the EUR 1.3 billion. This includes EUR 900 million related to Uruguay project and EUR 100 million related to biochemicals project in Germany. Our maintenance CapEx needs are consistently low, less than EUR 200 million per annum.This was the prepared part of the presentation. Summarizing, I think, that I'm not going to repeat. We are in a solid condition. We are well prepared for the current uncertainties. We think about the world short term, which is this lockdown. We think about midterm, how to actually adapt our operations and how we react on the following recession that comes in, whether it's a V shape, U shape or L shape, we are prepared for that. And obviously, most important is that UPM is prepared for long-term earnings growth and the kind of opportunities throughout our spearhead of growth investments. And many of the things today, what we see in this pandemic are also supporting that what we are doing long term.So ladies and gentlemen, we are ready for your questions. Dear, operator, we can start the Q&A session.
[Operator Instructions] Our first question we have is from the line of Alexander Berglund from Bank of America.
Two questions from my side. The first one is on graphic paper and going into Q2. I know it's very uncertain times, and you don't want to give kind of any outlook. But one of your competitors talked about a 30% demand decline in Q2 on volumes on graphic paper. So my question is just, do you think that, that number is reasonable?And then secondly, also on graphic paper, more on prices. You give this chart on Page 31, where you look at the marginal cost producer versus the price. And it seems like that spread has increased a bit also now into the first quarter. So just looking at that, is there any risk that you might see any further pressure on prices if costs continue to be at a low level? That's my first question. And I think I'll take that a little bit there and then let you answer it.
Yes. If I may start, Tapio might follow after me, but as said already that we are not, at this stage, providing outlook for time being, and that is something that UPM is very kind of clear with.Obviously, how do we react? We -- in UPM, we have a -- I must say good plans, even not -- if not excellent plans for short term, medium term and long term kind of working. So basically, we are having a lot of people that are working on all of these issues. And when we are now in the lockdown situation, i.e., meaning that offices are closed down, no traveling, shops are closed and what have we, everybody knows it as well as we do, we have prepared ourselves to be adapting those circumstances in paper, but also in other areas as well, whether we have a positive opportunities where we are then trying to secure raw materials and securing the supply chain. And some of the areas that are having a negative impact, we are definitely taking all the actions needed.Now we are living the lockdown effects, and we have prepared ourselves for temporary layoffs. We have the Kurzarbeit in Germany, which is shortening working hours. That's how we react on that. Of course, this will follow a recession time, especially in Europe, tends to be quite much longer than elsewhere. So we are preparing for that as well. And obviously, we take all the actions to secure our strong cash flow and that we are running with full capacity. So basically, this is how we are reacting on this situation.And I think that long term, whether there will be structural changes in the businesses, if any company in many of these businesses that we are representing, whether it's pulp, self-adhesive labels or papers, specialty or communication papers, UPM is having a very good end-use study kind of capabilities. And we will definitely use those and take kind of commercial actions based on that. So basically, this is where we are. I'm not in the position to comment any of my competition kind of figures and our kind of guidance. We are not providing unfortunately the guidance at this point.
Okay. That's understandable. My other question was just on the Uruguay mill. And I was just looking at the pictures that you provided, seems to be relatively a lot of houses there. So I'm just wondering how do you ensure during these times at a construction site that you don't get a spread of the virus during the construction phase.
First of all, I think that we were having a kind of good benchmark coming from China. In China, when this whole pandemic, or then it was only COVID-19 at that time, started to spread, Chinese operations were making a great benchmark for UPM, how to actually act on -- in various situations, how to secure the kind of safety and -- health and safety of the people coming into the mill side. And we haven't had any suspected cases in China. We haven't had any corona case in China. And we do have 1,284 people in China. So basically, that was making a benchmark actions, which we have now copied with pride to different locations like in Uruguay.Today, when the mill site is actually -- once again, going forward, we have been testing every single person that goes into the mill site. And every day, we are then testing the temperature as well. So we have good kind of practices. And what comes to anything else that which is very common to all of us, we use those. A lot of kind of practicing and kind of -- we have been telling to the construction companies and our contractors how to -- how should we act. That's the way that UPM has been operating globally in China, in Europe, in Uruguay as well. And that's how we believe that we can really secure the health and safety of our people by testing, having the protective equipments and then every day kind of measurements like temperature.
Maybe if I can just add to that, that, of course, we are lucky in that we are still in a relatively early stage in the projects. So the more labor-intensive stages where you have then thousands of people on the site are still well ahead of us. So in that sense, the situation right now and during this year is, obviously, more manageable.
The next question we have is from the line of Lars Kjellberg from Crédit Suisse.
I just wanted to ask a bit about the exceptional strong step-up in performance in Raflatac. Have you seen in those numbers any specific benefit from COVID? I mean, one of your competitors, namely Avery Dennison, were talking about very strong demands in label specifically in part related to that. I don't know if you can shed any light on it because the step change in margins is -- they're quite remarkable. So that's one topic. And then also on the Specialty Paper side, if they have the same sort of benefit in that business from changing behaviors and increased -- I guess, stock building in e-commerce, et cetera.
Lars, thank you for the question. Yes. Yes, I think that it is fair to say that the end uses that we are serving in Raflatac, which is typically food packaging, and then home and personal care type of things have been important during this period as well. And therefore, there has been a good demand for that. It is related to two things. It is margin management where we have been doing more than 2 years a kind of work that is now paying off as well in the margin management and taking actions to provide good margin. And then the quarter 1 has been pretty solid on reasons that I just earlier mentioned, that there are kind of things which are related to food packaging, home and personal care, plus maybe the logistics, i.e., the e-commerce type of labels needed at this time of the period. So basically, these 2 factors.And then finally, of course, we have been very efficiently running our operations. We have been able to have a full run for the operations.
Can you comment at all, if anything, this has changed? I mean, we are hearing that some of the retailers are seeing more normalization of demand. Is that something you can note in that business? If you can comment on that, that would be helpful.
Basically, we are -- once again, we are not now providing kind of outlook, but then it is very much related to how this will evolve. And there, we do not have a kind of clear visibility to how it goes. The basic fundaments are supporting at this, even this short-term outlook, which is the lockdown, but how it evolves later remains to be seen.
Just as a follow-up if I may. One, if you can comment on the strikes in Finland, the financial impact of that, if you can share that with us. Also on costs, I mean, wood costs have been relatively -- consistently, relatively high, especially on the pulpwood side. Are you starting to see any benefits on the variable cost side from cost movements?
Maybe if I'll take that and just to continue still on Raflatac that, again, the fundamental thing has been that, let's say, the margins have been very good. And whatever impact in the markets we may have seen, it was at the very end of the quarter. So for the most part, the quarter was benefiting from the fact that we had the margins in the good shape. And obviously then, whatever additional boost we got towards the end, we were able to sort of take advantage of. And then now we'll see how the mix of end uses will impact going forward.But then to your question on the cost side, let's say, obviously, the impact of the strike was mostly felt in January and February, as said. And if you kind of look at the immediate impact then in sort of round figures, it was about EUR 30 million for us. But then how much of that in a sense was permanently last, how much was then in a sense something that partly was mitigated later on as the sort of months involved, one can say so that, of course, some of it is mitigated.Last production at the pulp mills, of course, was the most significant sort of permanent [ loss ]. In the paper business, we have sort of capacity elsewhere that we can compensate for the disruptions in Finland.Then, let's say, on the costs going forward, we do see, let's say, moderation on costs, obviously, as everyone can see oil prices down, energy costs, electricity prices down, which obviously impacts our costs directly but will likely have impact through lower logistics costs or inputs where energy -- or sort of supplies where energy is an -- or oil is an input like chemicals or raw materials for Raflatac.And when it comes to wood, we have seen, if you look at the stumpage price, some, let's say, moderate decline taking place here in Finland. And then -- well, we'll have to see what the impact of everything that is going on around us and in the economy going forward will be during the coming quarters.
The next question we have is from the line of Justin Jordan from Exane BNP Paribas.
I've got two sort of very different questions. Firstly, just within Communication Paper. The EUR 45 million special item that you've taken in Q1 for -- I assume this is all relating to Chapelle. Can you break that down for us between cash and noncash? And I assume that the EUR 45 million is assuming essentially no disposal, a full potentially shutdown and all redundancy costs and environmental costs. And then clearly, if it were to be, so potentially, some of that might get written back. So that's my first question. And then I've got some follow-ups.
Well, it's mostly cash impacts of cost of eventual shutdown where that the way to go. And as you say then, if there is a kind of a deal to be done in terms of sale of the assets, then obviously depending on the conditions or terms of the deal, that could be sort of mitigated, but remains to be seen, obviously, whether there's a deal or not.
Sure. Okay. And just thinking in some -- sorry, just follow-up on a completely different topic. Clearly, reading trade price, you're in consultation with various worker groups and union groups regarding potential temporary measures at various mills globally. I guess my question is, have you at this point already taken some downtime, some temporary shifts off at this point around the world? Or how quickly can you bring on those measures as required potentially in Q2?
You see here, I think that we are well prepared for whatever is needed actually in all of our businesses where we see a requirement for that. There are changes, like in Finland, there has been changes in the agreements of the unions on national level that you can have a fast track on implementing temporary layoffs. So that's done. And we have been preparing on those businesses where that is needed, similar in Germany where we have the Kurzarbeit possibility. So basically, we are well prepared for those action. And that has been our main focus, to be prepared to mitigate the lockdown effects.
Sure. Okay. One final question, just on the spearheads of growth. Am I right in inferring, essentially, there's no change in the CapEx guidance? There's no change to the anticipated timing of both Uruguay and the German biochemical lab coming on stream in, let's just say, second half of 2020? And at this point, clearly, I know you've had some temporary construction delays, but nothing of any materiality to the timing or total capital cost of either project?
Roger that. Yes.
The next question we have is from the line, I think, of Henrick Taittonen (sic) [ Harri Taittonen ] from Nordea.
Yes. So Harri, rather, from Nordea. Can you talk a bit on the biofuels? Kind of what is the performance -- what are the performance drivers for that business now with this extreme kind of oil prices? Just sort of remind how the kind of mechanics work. And possibly related to that, how -- does it somehow affect the kind of the preparation of the studying of the various raw materials, et cetera, for the technical solutions for the potential Kotka biofuel project?
Well, maybe if I'll comment on that. So maybe to start from the point that we are producing so-called advanced renewable fuels, which is also the aim with the planned expansion in the biofuels, meaning that the achieved reduction in greenhouse gas emissions is high, over 80%, and in our new project could be even higher than that.And in the markets where we sell, the pricing is driven by that greenhouse gas reduction, which sets the bio-premium that is paid for the fuel, and that bio-premium has been quite solid and good for us. So I would say that, again, when there are strong movements like there has been now with oil and however it sort of translates through the refining industry to the outputs, there can be some, let's say, timing impacts in terms of then how the sales price on one hand and the feedstocks on the other for our production move. But overall, the performance even in these conditions is very good for our biofuels business.And I would say that, that just sort of further underlines the importance of the work that we are now doing for the potential expansion because, again, the focus there is for us to differentiate ourselves in terms of the mix of feedstocks that we are using, including wood biomass, and to even increase the impact to the greenhouse gas emissions compared to what we are able to achieve today, which would increase the bio-premium further.
Exactly. Maybe just one more question related to China and given that some capital goods companies and also your peers have talked about kind of operations getting back to normal. And just sort of what are you seeing there because you have basically the fine paper segment and the specialty segment there? What is the current portion for you in China between the specialties and fine paper? And what sort of other differences in the market for those 2 main segments as you see now?
Yes, during the Q1, to be specific, we did have and we have had globally quite strong demand for specialty papers, and that has been pretty clear. As well, we have had quite solid demand for the fine papers, office papers and graphic papers in China. Obviously, you're right, Harri, that now China is getting back on a more normal situation. And that is visible when you are looking the kind of roads and highways. You have lorries and people back on those. Obviously, still having a lot of things to be controlled that there will be no second wave of this COVID-19 pandemic. So therefore, there are some restrictions still in traveling, for example. But basically, we have been running throughout the Chinese New Year, first of all, and the Q1 was, in volumes, strong in -- especially in the specialty part of the business.
Excellent. And have you recently specified how much roughly of Changshu output goes to specialties business and how much is fine paper? Or is it something you have not commented?
We have not commented that, but basically, the full of PM3 is now specialties, and then the rest is office and graphic papers.
We currently have 4 questions remaining in the queue. The next question is from Mikael Doepel from UBS.
Just briefly coming back to Raflatac and the exceptionally strong performance. From a historical perspective, would you say that the price/costs spread in the Raflatac's business was exceptionally good in Q1 or not?
Well, I would say, yes, it was. But again, as a result of work that has been done also over many quarters, not only that it happened this quarter because, as mentioned, we have been improving the mix of business in Raflatac. And now also, let's say, during the recent quarters, our focus has been very much on margin management. So in that sense, it was a very good quarter from the margin point of view, but we have been sort of building towards that for some time.
Okay. And for the Specialty Papers division, just looking at the numbers, it seems as if the production costs were very low in the quarter and a key reason for the very strong margin. What was the reason for that? And do you see it as sustainable or not?
Well, in that case, of course, if you look at the costs, in Specialty Papers, that is the business where pulp has the highest share in terms of input costs. So as I mentioned earlier, I think, in the call, the low pulp prices, in a sense, benefited on the cost side. Obviously, the strong demand and, let's say, the very good position that we have, particularly in label papers, then meant that we were able to keep that benefit to ourselves.
Okay. Okay. And then just finally, on CapEx, it seems as if you upped this year's CapEx by about EUR 100 million compared to your previous guidance. What was this -- well, first of all, what was this? And secondly, was this a shift from 2021 rather than anything else?
We did not change actually. Like Jussi said, we gave this guidance already in the beginning of the year when also we announced the investment decision to the biochemicals refinery in Germany. So that added EUR 100 million. At that time that information was already given, that added EUR 100 million to the CapEx for this year. So then EUR 1.3 billion was the figure in January already.
Okay. Okay. Well, that's clear. And then just finally, on the wood products sawn timber business, I realize, again, you're not giving guidance, but right now, what do you see in that -- in those businesses in terms of demand?
Well, as said, in those businesses, we are, of course, serving end uses that are related to construction, investments in logistics, but also then refurbishment of buildings and so on and so forth. So whatever impacts this lockdown has on that and kind of the economic conditions that follow from there, then that will be obviously felt in our timber and the plywood business as well.
The next question we have is from the line of Robin Santavirta from Carnegie.
Yes. So in terms of the planned biofuel investment, could you just remind us what is the currently planned capacity? And what kind of investment in total are we talking about? And could you just give any guidance on what the time line at the moment looks like for that project, please?
Well, what we have said as far as the kind of rough figure for capacity is around 0.5 million tonnes. And we have not given any number on the CapEx for that. And there, we are in the sort of technical design and development work, which is still ongoing during this year. Before then, we would be in a position to start, let's say, going towards the actual investment decision. And again, as I was discussing earlier here already that, that sort of technology work is particularly important for our strategy as far as the feedstocks are concerned. So there's still work ongoing. And after this year, we will know more.
Would -- could it be that you would already be ready to decide on this investment in 2021? Or is that too early?
We will see. That's still early to start, let's say, talking about more definite sort of timing on that.
All right. Then as you mentioned, clearly, you have a strong balance sheet and a good financial position. Are you looking to be involved in any kind of -- be it structural measures or transactions in order to strengthen your position if this then were to be a long recession or a long tough time for players in your industry? Or are you solely focusing on the organic project that you have ongoing?
This is Jussi. I think that we are in a great position that we can consider both if needed. But of course, if -- like you said, that are we looking for a strengthening our position, financial position, for the future. Obviously, this pulp mill and then biochemicals investments are strengthening our financial capability and capacity and result significantly for the future. So basically, UPM is having a good growth investment. And that's one of the focus. But of course, if there will be interesting small, medium or even large size of the transactions, we could consider that is not necessarily said that it isn't in our portfolio. But like I said, that we are having a very clear strategy within UPM. And obviously, this spearhead of growth is solid for the future and even strengthening our position and financial -- or sorry, the kind of profit growth for the future. So we'll see. But like I said, we are very kind of happy with the situation today. We do have a growth in pipeline.
And then finally, maybe to Tapio. Could you just remind how much of the group's cost base is fixed?
We haven't sort of given numbers on that as such. But let's say, in round share, you can say, 20% or so.
And do you have a rough split on that on top of your head?
No, not further sort of split on that.
The next question we have from the line of Mark (sic) [ Markku ] from Handelsbanken Capital Markets.
Yes. It's Markku Järvinen from Handelsbanken. I had a few more clarifications here. I suppose from Raflatac still, I appreciate you had strong demand and good efficiency, but you also mentioned positive FX impact. Could you please quantify that and just comment whether that was normal translation, transaction? Or was there possibly a sort of a balance sheet impact from working capital or something like that?
No. No number on that, but that was in the sort of ongoing operations on ongoing business.
So that will sort of carry on to coming quarters?
Yes. We will see, depending obviously how the FX develops.
Sure, sure. Then on the maintenance of the pulp mills that is now moved to Q4 from Q2. You've previously said, I believe, that typical impact is EUR 20 million. Does that still hold with current pulp pricing?
Yes. Let's say so that if we had the strike in Finland in the first quarter now, then this pulp mill maintenance and the impact might have been -- might be in the same order of magnitude. We have said, let's say, about EUR 10 million per big mill in fixed cost, plus the sort of lost margin on top of it. And obviously, the lost margin depends on pulp price.
Sure. Sure. Then just finally on Communication Papers. Typically, you have biannual contracts that are renegotiated for the first 6 months of the year in magazine and newsprint, especially. I was just wondering, did you see the full impact of the somewhat lower prices already in Q1? Or is there some sort of a delta still in Q2? So did that pass through already fully?
Yes, what was negotiated the end of the year, yes, that was fully implemented in Q1.
The final question we have at the moment is from Cole Hathorn from Jefferies.
Just on Communication Paper, you mentioned your flexibility on temporary layoffs to curtail production as required. However, when you're thinking about your customers in this division, like the various publishers and printers across Europe, are you doing anything different that you can call out to help customers like potentially extending payment terms in 2Q for those customers you think will do well and you want to continue business with?
Not -- we do many things with the customers typically, but of course, we have the deals, and that is, say, in between us, us and the customers. That is typically a thing that we do not comment. But obviously, we are actually taking the benefit of the market today wherever it goes.
Currently, there's no further questions in the queue at this time.
Ladies and gentlemen, thank you for your interest. And like I said that UPM had a solid quarter and like underlying that, that it's great to be in the shape to be able to run through these projects that we have in our kind of operations, i.e., the Uruguay and the biochemicals. With these words, thank you once again, and see you. Thank you. Be safe.