UPM Annual Report 2016
Accounts
In brief
Strategy
Businesses
Stakeholders
Governance
2.2 Sales
2.3 Operating expenses and other operating income Operating expenses Operating expenses excluding forest assets fair value change, wood harvested and share of results of associates and joint ventures are presented below.
Items affecting comparability
EURm
2016
2015
UPM generates revenue mainly from the sale of several types of products. UPM sells a proportion of its products to several major customers. The largest customer in terms of sales represented approximately 3% of UPM’s sales in 2016 and 2015, and the ten largest customers represented approximately 16% (15%) of such sales.» Refer Note 2.1 Business areas for information on UPM products.
In operating profit: Impairment charges Restructuring charges
–35 –48
–
–5
Change in fair value of unrealised cash flow and commodity hedges
27 49
–18
Capital gains on sale of non-current assets
6
Fair value changes of forest assets resulting from changes in estimates
– –
265 –22 226
Other non-operational items
EURm
2016
2015
Total
–7
Costs and expenses Raw materials, consumables and goods
Sales by business area
In finance costs: Losses on sale of associates and joint ventures
5,376 1,246
5,784 1,257
–2 –2 –9
– –
Employee costs 1)
EURm
2016 2,206
2015 Change
Total
Other operating costs and expenses 2) Delivery costs and other external charges
884 859
943 856
Total in profit before tax
226
UPM Biorefining UPM Energy UPM Raflatac UPM Paper ENA UPM Plywood Other operations UPM Specialty Papers
2,272
–3%
357
415
–14%
In income taxes: Taxes related to items affecting comparability
Total
8,365
8,840
1,437 1,273 4,818
1,409 1,168 5,056
2% 9%
7 4
–44
Changes in tax rates
–
1) » Refer Note 3. Employee rewards, for further information .
–5%
Total
11
–44 182
444 285
439 406
1%
Total in profit for the period
1
2) Distribution of other operating costs and expenses EURm
–30%
2016
2015
Eliminations
–1,009 –1,027 9,812 10,138
–
In 2016, items affecting in comparability in operating profit include impairment charges of EUR 11 million relating to Madison mill closure, EUR 23 million relating to planned closure of Steyrermühl paper machine 3 and EUR 1 million relating to planned closure of Augsburg paper machine 2. Restructuring charges reported as items affecting comparability include EUR 13 million relating to Madison mill closure, EUR 22 million relating to planned closure of Steyrermühl paper machine 3, EUR 18 million relating to planned closure of Augsburg paper machine 2 and income of EUR 5 million relating to reversals of restructuring provisions of prior capacity closures. Capital gains affecting the comparability comprise of a gain of EUR 47 million relating to sale of Schwedt mill assets and EUR 2 million relating to sale of other assets.
In 2015, fair value increase of forest assets in Finland totalling EUR 265 million, due to adjusted long-term wood price estimates and a change in the discount rate, is reported in items affecting comparability. Other non-operational items affecting comparability include EUR 19 million project expenses of Olkiluoto 4 nuclear power plant and EUR 3 million other expenses. Capital gains affecting the comparability comprise of a gain of EUR 3 million relating to the sale of Tilhill Forestry Ltd shares and EUR 3 million relating to the sale of other assets.
Total
–3%
Rents and lease expenses
48
51 14
Emission expenses
9 3
The biggest factor affecting UPM’s financial results is the sales price of paper. A change in the volume delivered has less than half of the effect of the same percentage change in sale prices.
Losses on sale of non-current assets
2
Credit losses
10
18
Maintenance and other operating expenses 1)
815 884
858 943
Total
1) Other operating expenses include, among others, energy as well as expenses related to services and group’s administration. to be updated
Effect of a 10% change in prices on operating profit for the year
EURm
2016
2015
Cost structure 2016
Papers in UPM Paper ENA
471
501
Fine and specialty papers in UPM Specialty Papers
Delivery of own products 10%
106 144
97
Other fixed costs 10%
Label materials in UPM Raflatac
141
Wood and fibre 29%
Employee costs 15%
Plywood
41 30 33
41 30 21
Sales by destination
Sales by country
Sawn timber
Chemical pulp (net effect)
EURm
2016
2015
Finland
886
900
Other variable costs 17% to be updated
Germany
1,699 1,217
1,658 1,253
63%
13%
United States
18%
Energy 8%
Fillers, coating and chemicals 11%
United Kingdom
715 860 434
916 852 421
Accounting policies Revenue from UPM’s product sales is recognised when the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on delivery terms. Group terms of delivery are based on Incoterms 2010, the official rules for interpretation of trade terms issued by the International Chamber of Commerce. Revenue is recorded when the product is delivered to the destination point for terms designated Delivered Duty Paid (“DDP”) or Delivered at Place (“DAP”). For sales transactions designated Free on Carrier (“FCA”), Carriage paid to (“CPT”) or Carriage and Insurance Paid to (“CIP”), revenue is recorded at the time of shipment. UPM sells energy to NordPool electricity market. Revenue is recognised when electricity is transmissed. UPM provides forest expertise and contracting services to woodland and forestry owners. Revenues from services are recorded when the service has been performed. Sales are recognised net of indirect sales taxes, discounts, rebates and cash flow hedging results of sales in foreign currency as well as hedges of energy sales.
China France
2%
Cost structure 2015
Uruguay
48
61
2%
Other EU countries
2,099
2,103
2%
Delivery of own products 10%
Other European countries
383
436
Other fixed costs 10% Employee costs 14%
Rest of world
1,472
1,538
Wood and fibre 29%
Total
9,812 10,138
Other variable costs 17%
Total assets and capital expenditure by country
Assets
Capital expenditure
Energy 9%
Fillers, coating and chemicals 11%
EURm
2016
2015 8,524 1,148
2016
2015
Finland
8,566 1,008
157
218
Germany
18
20
Auditor’s fees
United States
437 185 879
491 211
3 8
5 8
United Kingdom
EURm
2016
2015
China France
1,037
13
215
Audit services Tax consulting Other services
2.3 0.7 0.6 3.6
2.3 0.8 0.5 3.6
71
63
3
2
Uruguay
2,010
2,004
84 33
26 22
Other EU countries
325
325
Total
Other European countries
91
71
5 1
2 2
Rest of world
340
319
Total
13,911 14,193
325
520
CONTENTS
ACCOUNTS
114
115
UPM Annual Report 2016
UPM Annual Report 2016
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