UPM Annual Report 2016

Accounts

In brief

Strategy

Businesses

Stakeholders

Governance

5.

Capital structure

Maturity table of debt at the end of 2016

EURm Bonds

2017

2018

2019

2020

2021

2022+

TOTAL

UPM has a strong cash flow and industry-leading balance sheet that mitigates risks and enables value-enhancing strategic actions.

292

237 305

–

–

–

356

885 685 148 195 180

Loans from financial institutions

21 74 88

320

16

10

14

Net debt

Free cash flow

Pension loans Finance leases Other loans Current loans

74

– 8 1 –

–

– 5 – –

–

1,131m

1,424m

UPM’s capital

7 4

49

37

EUR

EUR

1

1 –

173

EURm

2016

2015

(EUR 2,100m)

(EUR 750m)

26

–

–

26

Equity attributable to owners of the parent company

Principal payments Interest payments

502

628

328

65 36

15 35

581 218

2,118

8,234

7,942

5.1 Capital management UPM’s objective for managing capital comprising of net debt and total equity is to ensure maintenance of flexible capital structure to enable the ability to operate in capital markets and maintain optimal returns to shareholders. The group manages its financing activities, debt portfolio and financial resources via various policies that are designed to ensure optimum financing arrangements minimising simultaneously financial expenses and refinancing risk and optimising liquidity. Borrowing activities are centralised to the parent to the extent possible and cash resources are distributed within the group by the central treasury department. UPM targets a net debt to EBITDA ratio of approximately 2 times or less. Liquidity and refinancing risk UPM seeks to maintain adequate liquidity under all circumstances by means of efficient cash management and restricting financial investments to investment types that can readily be converted into cash. Adequate liquidity is maintained by keeping sufficient amount of unused committed credit lines as a reserve. Refinancing risks are minimised by ensuring a balanced loan portfolio maturing schedule and sufficiently long maturities. The average loan maturity at 31 December 2016 was 5.3 years (5.5 years). UPM has some financial agreements which have gearing as a financial covenant whereby it should not exceed 110%

88

50

41

468

Non-controlling interest

3

2

Total equity

8,237 1,835

7,944 2,797

The difference between the above nominal values and carrying value of total debt arise from fair value adjustments increasing carrying value by EUR 202 million and other non-cash adjustments decreasing carrying value by EUR 18 million.

Non-current debt

Current debt

585

269

Total debt

2,419

3,066

Total capitalisation

10,657 11,010

Total debt

2,419 –1,289

3,066 –966 2,100

Maturity table of debt at the end of 2015

Less: Interest-bearing financial assets

Net debt

1,131

EURm Bonds

2016

2017

2018

2019

2020

2021+

TOTAL

Gearing ratio, % 1) Net debt to EBITDA 1)

14

26

–

340 208

230 313

–

–

421

991

0.73

1.56

Loans from financial institutions

37 74 32

453

19

26

1,056

1) Refer Note 10.2 , Alternative performance measures

Pension loans Finance leases Other loans Current loans

74 86

74

– 6 – –

–

–

222 198 170 103

5 2 –

47

22

2

2 –

1 –

163

103 248 101

–

Principal payments Interest payments

710

624

459

67 37

632 271

2,740

96

56

42

603

Liquidity

EURm

2016

2015

The difference between the above nominal values and carrying value of total debt arise from fair value adjustments increasing carrying value by EUR 256 million and other non-cash adjustments decreasing carrying value by EUR 22 million.

Cash at bank

590 402 656

545

Cash equivalents

81

Committed credit lines

1,025

of which used

–5

–

Maturity table of derivatives and guarantees at the end of 2016

Used uncommitted credit lines

–26

–103 –145 1,403

Long-term loan repayment cash flow

–477 1,140

EURm

2017

2018

2019

2020

2021

2022+

TOTAL

Liquidity

Net settled interest rate swaps Net inflow

52 –8

23 –7

14 –8

13 –6

12 –5

66 –4

180 –38

Net outflow

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included in used uncommitted credit lines and presented within current debt in the balance sheet. The most important financial programmes in use are: Committed: – Bilateral revolving credit lines. Uncommitted: – Domestic commercial paper programme, EUR 1,000 million.

Gross settled derivatives: Gross currency swaps Total inflow

302

101 –78

9

7

7

226

652

Repayments of debt at the end of 2016

Total outflow

–371

–1

–2

–2

–193

–647

Forward foreign exchange contracts Total inflow

EURm

369

– – –

– – –

– – –

– – –

– – –

369

750

Total outflow Guarantees

–368

–368

600

2

2

450

300

Maturity table of derivatives and guarantees at the end of 2015

150

0

EURm

2016

2017

2018

2019

2020

2021+

TOTAL

17

18 19 20 21 22+

Net settled interest rate swaps Net inflow

54 –7

53 –7

23 –5

11 –6

12 –2

82

235 –27

Net outflow

–

Gross settled derivatives: Gross currency swaps Total inflow

Committed credit lines’ maturities (EUR 656 million) at the end of 2016

18 –8

354

101 –82

12 –5

10 –6

325

820

Total outflow

–374

–335

–810

EURm

750

Forward foreign exchange contracts Total inflow

600

671

– – –

– – –

– – –

– – –

– – –

671

Total outflow Guarantees

–673

–673

450

4

4

300

150

0

22+

17

18 19 20 21

CONTENTS

ACCOUNTS

130

131

UPM Annual Report 2016

UPM Annual Report 2016

■ Repayment ■