UPM Annual Report 2016

Accounts

In brief

Strategy

Businesses

Stakeholders

Governance

Change in net debt 2015

5.2 Net debt

Reported in financing activities in cash flow statement

NON-CURRENT LOANS INCL. REPAYMENTS

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

Net debt is defined as the total of current and non-current debt less cash and cash equivalents and interest-bearing current and non- current assets. Net debt totalled EUR 1,131 million at the end of 2016 (2,100 million). Following the strong cash flow during 2016, the group was able to reduce net debt by EUR 969 million.

FINANCE LEASES

CURRENT LOANS

NET DERIVATIVES

EURm Net debt

EURm

Gearing %

Carrying value, at 1 January Change in net debt, cash: Proceeds from non-current debt Payments of non-current debt

–2,978

–272

–74

166

57

700 –2,401

3,500

50

2,800

40

–22 439

–

– –

– – –

– – – –

– – – –

–22 519 –22 –43

80

2,100

30

Net debt

Change in current liabilities Net cash flows from derivatives Change in other financial assets in operating cash flow Change in cash and cash equivalents

– –

– –

–22

1,400

20

–

–43

700

10

EURm Bonds

2016

2015

– –

– –

– –

– –

–3

–

–3

0

0

717 664

1,165 1,013

12

13 14 15 16

–

–75 –75

–75 354

Loans from financial institutions

417

80

–22

–43

–3

Pension loans Finance leases

77

158 167

Change in net debt, non-cash: Fair value gains and losses Exchange gains and losses Effective interest rate adjustment

106

5

–

–

72

–

– 1 – – 1

77

Derivatives Other loans

34

71

–105

–1

–8

– – –

–1

–114

236

223

–11

–

– –

– –

–11

Non-current debt

1,835

2,797

Accounting policies

Other non-cash changes

–

–5 –6

–5

Repayments of non-current debt

477

144

–111

–8

72

–1 53

–53

Derivatives

82 26

21

Carrying value, at 31 December

–2,672

–198

–104

195

626

–2,100

Other liabilities Current debt

104 269

Debt Debt comprising of bonds, bank and pension loans and other loans is recognised initially at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the estimated life of the borrowing. UPM classifies debt as non-current unless due for settlement within a year. Most of the debt is hedged in a fair value hedge relationship as described in » Note 6.1 Financial risk management .

585

Total debt

2,419

3,066

Free cash flow Free cash flow is primarily a liquidity measure. It is an important indicator of UPM’s overall operational performance as it reflects the cash generated from operations after investing activities. UPM’s free cash flow has enabled payment of dividends as well as repayments of debt reducing net debt significantly.

Loan receivables

11

10

Derivatives

216

278

Other receivables

32

30

Non-current interest-bearing assets

259

318

Loan receivables

6

5 9 8

Derivatives

12 19

Other receivables

Cash and cash equivalents Current interest-bearing assets Total interest-bearing assets

992

626 648 966

1,030 1,289

EURm

2016

2015

EURm Free cash flow

Operating cash flow Investing cash flow

1,686 –262 1,424 –400

1,185 –435

Net debt

1,131

2,100

1,500

Free cash flow Dividends paid

750

1,200

–373

900

Other financing cash flow

–19

–20

Change in net debt 2016

Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow

600

Reported in financing activities in cash flow statement

13

–3

300

NON-CURRENT LOANS INCL. REPAYMENTS

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

2

–

0

FINANCE LEASES

CURRENT LOANS

NET DERIVATIVES

12

13 14 15 16

Change in net debt, cash Change in net debt, non-cash

1,020

354 –53 301

EURm

–51 969

Carrying value, at 1 January Change in net debt, cash: Proceeds from non-current debt Payments of non-current debt

–2,672

–198

–104

195

53

626 –2,100

Decrease in net debt Opening net debt

–2,100 –2,401 –1,131 –2,100

–1

– 7 – –

– –

– – –

– – – –

– – – –

–1

Closing net debt

533

540

Change in current liabilities Net cash flows from derivatives Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow Change in cash and cash equivalents

– –

77

77 22

–

22

Bonds

–

–

–

–

13

–

13

NOMINAL VALUE ISSUED, MILLION

CARRYING VALUE 2016 EURm

CARRYING VALUE 2015 EURm

–

–

–

–

2 –

–

2

INTEREST RATE, % CURRENCY

367

367

FIXED RATE PERIOD

532

7

77

22

15

367 1,020

1997–2027 2000–2016 2002–2017 2003–2018

7.450 3.550 6.625 5.500

USD

375

471

470

Change in net debt, non-cash: Fair value gains and losses Exchange gains and losses Effective interest rate adjustment

JPY

10,000

–

95

55 11 –8

– – –

– 1 – – 1

–105

– – – – –

–

–50

GBP USD

250 250

293 246

355 245

– – –

–1

11 –8 –4

– –

Value, at 31 December

1,010

1,165

Other non-cash changes

–

–4 –4

Current portion

292 718

–

58

–105

–1

–51

Non-current portion

1,165

Carrying value, at 31 December

–2,082

–195

–26

112

68

992 –1,131

CONTENTS

ACCOUNTS

132

133

UPM Annual Report 2016

UPM Annual Report 2016