Forest industry | UPM’s new director is a “reserved” Italian with a big smile – he hints at future investments for Finland

Forest giant UPM’s direction has long been worrying for Finland. Pulp, paper, electricity and plywood are produced in Finland, but all the company’s growth projects are worldwide.

Last year, a gigantic pulp mill in Uruguay started up. At the end of this year, a giant factory in Germany that makes plastic raw material and fillers from beech will be completed.

Raflatac, or stickers, which has grown into a business worth one and a half billion euros, is mostly manufactured elsewhere. The refinery project producing renewable fuels also went to Rotterdam instead of Kotka.

The concern is not reduced by the fact that the company’s new CEO is Italian.

Massimo Reynaudo assures that Finland’s importance in the company is not going anywhere.

“We have 28 production plants here and about 6,300 employees. UPM’s culture was created in Finland. Finland is also a big market for us,” he says.

Burglary and the shrinking of Finland’s printing value is not actually the fault of the company’s management, but rather the collapse of paper consumption. Until 15 years ago, UPM was primarily a paper producer.

Previous CEO Jussi Pesonen got a rescue mission in front of him. The company had to find new business to replace the withering business.

The company succeeded amazingly well in that. The company’s turnover has remained stable at around ten billion euros, even though paper turnover has halved in 15 years.

Reynaudo’s task is to make the investments made during Pesonen’s tenure bear fruit and to look for new growth. He assures that Finland has a good chance of succeeding in the competition for future investments.

“Finland has a lot of good ingredients, such as a lot of low-cost, emission-free electricity that the world needs. There are also highly educated people in Finland.”

UPM is Finland’s second largest electricity producer after Fortum. The next big investments will not be pulp or paper mills, but probably something else.

Already Pesonen threw out visions of capturing carbon dioxide emissions from pulp mills and refining them into so-called e-fuels. However, according to Reynaudo, the time for these investments is not yet.

“Many factors have to fall into place before the investment is concluded. Many new technologies are not even commercially mature yet,” says Reynaudo.

UPM typically invests heavily, and in any case, the preparation of billion-dollar investments takes years before even an investment decision is made.

On Reynaudo turns seven this week at UPM.

Before that, he worked for twenty years at the American company Kimberley-Clark, which makes, among other things, diapers and other paper-based hygiene products.

“The culture and style was very different. From the first meetings at UPM, I liked the authenticity and very direct, informal style of communication,” says Reynaudo.

In an American company, you had to make a fuss about yourself and be visible.

“Finns are more prepared, like me. I fit in very well here.”

Reynaudo clearly does not want to make a number of himself.

The author of the interview happened to be on the same Milan plane on Sunday evening, when Reynaudo returned from spending the weekend with his family. He flew in the cramped economy class of a crowded plane.

“Why not. I was wondering where I had seen you,” Reynaudo says and flashes his broad smile.

The trip to the family in the Turin area is long, but Reynaudo praises the good connections. He has been working around the world for over 20 years. He comes home when he can.

“I rest, do some sports and spend time with my daughter. I am so lucky to have the most beautiful girl in the world. My family visited here a couple of weeks ago. They really liked it.”

Reynaudo came to UPM to work at Raflatac, which makes labels. In 2021, he got to manage the declining printing paper business, which still accounted for almost half of the company’s turnover.

In February 2022, Russia attacked Ukraine, which was followed by a rapid increase in the cost of energy. In the spring, a strike closed most of the company’s factories in Finland for more than three months. The decline in demand for printed papers continued.

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Reynaudo’s shares started to rise in Jussi Pesonen’s succession plans.

Already in the fall of 2022, however, the printing paper business made a great result. Turnover increased by 36 percent from the previous year, and the price of newsprint was raised drastically. At the end of the year, operating profit was 18 percent in relation to turnover.

It can be considered almost a miracle.

“It wasn’t a miracle. I don’t do miracles. It was the result of the whole team’s hard work,” says Reynaudo.

Instead of long sales contracts, UPM introduced quarterly pricing. Procurement and the planning of the entire operation began to operate with a significantly shorter cycle than before. Every point was enhanced.

The company the performance attracted the attention of the government. Reynaudo’s shares started to rise amid speculation about Pesonen’s successor.

Printing papers at the beginning of this year, they still brought 30 percent of the company’s turnover and a fifth of the result, but their weight in UPM is inexorably shrinking in line with the demand for paper.

In Finland, the share of papers in business is large.

The company has reported every year about the closure of some machines or entire paper mills. In Finland, the previous big blow was the closing of the Kaipola factory in Jämsä four years ago.

Since then, factories have closed in Germany and Austria. The energy crisis improved the relative competitiveness of Finnish factories when electricity became more expensive in Germany than in Finland.

“Closing factories is sad and difficult. However, the competitiveness of the remaining factories and the workers there must be ensured in a declining market,” says Reynaudo.

According to Reynaudo, it is impossible to say how many paper machines will be needed in, say, 20 years. No new ones have been built in Finland for 25 years.

“It may be that in some types of paper the decline will level off, but what is certain is that the decline will not stop and paper consumption will not turn to growth.”

Before long, bad news will surely be heard again in Finland.

Finland from that point of view, the availability and price of wood is also a big issue when imports from Russia stopped. According to experts, felling has already exceeded the sustainable level in terms of combating climate change.

According to Reynaudo, the wood shortage can only be solved by reducing the production capacity. So is one of the company’s three pulp mills under threat?

Reynaudo refuses to speculate. Of course, the reduction can also come from competitors.

“Due to the difficult market situation, we will have temporary production shutdowns in the near future, but all our factories are large and part of a larger entity with a lot of synergies.”

Shutdowns and layoffs still do not bode well.

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Reynaudo doesn’t want to comment on Stora Enso’s uproar.

Wood raw material availability is generally not a given in Europe. The use of wood and forest management practices have also been discussed frequently in Finland in recent years.

Reynaudo believes that the use of wood will continue, because there is simply so much need in the world for renewable raw materials that replace fossils.

However, the sustainability of forest management must be taken care of.

Reynaudo doesn’t want to directly comment on competitor Stora Enso’s brutal uproar. But the company puts a lot of effort into keeping the promises made about responsibility.

“With continuous inspections and training, we ensure that the instructions are followed. But when it comes to people, mistakes or omissions are always possible,” he says.

I’m growing in addition, Reynaudo has to think about what all falls under the roof of UPM. The company has already splurged on quite a few.

The soon-to-be-started chemical plant in Germany is pure chemical industry, even though the raw material is wood. The manufacturing technology was developed by UPM.

The chemical industry also includes the production of renewable diesel and aviation fuel, which is planned for Rotterdam.

The sticker business is also very different from traditional pulp and paper. According to Reynaudo, the different parts have a lot in common. Businesses use each other’s side streams or produce raw material for each other.