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PPE Products

May 12th, 2022

The True Cost of the 2022 UPM Strike

Since January 1st of this year, workers of the Finnish paper mill company UPM had been striking to bring about improved employment conditions and a salary increase – a strike that was extended six times, as negotiations failed to bring about a satisfactory agreement between workers and the UPM branches involved for almost four months. Strikers rebelled against the conditions set out by UPM at the end of last year, which included the increase of working hours without an accompanying rise in salary. Until recently, UPM and the Paperworkers’ Union had failed to negotiate new terms that were acceptable to both the UPM paper mill company and its workers. However, this strike finally came to a close on the 22nd of April after seven business-specific agreements were made between UPM and the strikers, with workers returning to UPM mills on the 23rd of the same month.

UPM revealed the strike was likely to have impacted the results of Q1

In total, this meant that the strike lasted for a total of 112 days, which had significant ramifications on UPM operations – but what exactly was the cost? UPM revealed the strike was likely to have impacted the results of Q1 by around €220 million, largely as a result of lost sales, with UPM speculated to have lost up to €3 million for each day that the strike continued. Despite this, sales were still higher in almost every UPM branch than in Q1 of the previous year, with only UPM fibres falling short, as a result of higher sales prices, which managed to offset the damage of the strike and minimise the impact of the war between Russia and Ukraine, which is impacting wood supply. For example, at UPM Communication Papers, sales rose by upwards of 22% despite the fact that the volume of paper delivered was 20.3% less than in the same quarter of the previous year, and these figures are reflected in UPM Raflatac, UPM Specialty Papers and UPM Plywood. In contrast, UPM Fibres – comprised of UPM Pulp and UPM Timber – reported that sales fell by 28% and pulp deliveries halved and the majority of pulp production was halted, operating at a third of its usual capacity, as a result of the strike.

Margins fell from 15.9% to 7.4%

One of the biggest financial impacts that the strike had for UPM was on operating costs. At UPM Raflatac, operating margins fell from 15.9% to 7.4%, while at UPM Specialty Papers, operating margins fell by two thirds, and this was reflected across most of the UPM branches. UPM wasn’t the only entity that endured the financial consequences of the strike, with the Finnish Industrial Union and other unions associated with the cause having sacrificed over €2 million to support the continuation of the strike. Going forward, the conclusion of the strikes at UPM should mean that delays should ease up and businesses should be able to access UPM products more easily than in the previous few months. However, the ongoing conflict between Russia and Ukraine is presenting supply problems that may continue to disrupt UPM operations, as a significant proportion of UPM’s raw material supply is in Russia. This may put a bottleneck in place that prevents UPM from operating at full capacity, despite the fact that workers have returned to enable this, and may result in even higher costs for customers. However, UPM is reassuring that efficient order fulfillment is being accomplished, suggesting that the corporation has measures in place to offset the loss of access to these materials, which we can hope will speed up delivery time and stabilise costs for customers.

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