UPM Annual Report 2016

Businesses

In brief

Strategy

Stakeholders

Governance

Accounts

UPM Raflatac Building on strengths

AN INNOVATION SO THIN IT VANISHES UPM Raflatac, Saimaan Juomatehdas Brewery and Auraprint printing house have joined forces to develop the thin Vanish™ labelling material for aluminium beverage cans that can be recycled. Vanish allows self-adhesive labelling to be applied to beverage cans, aluminium cans to be recycled and the opportunity for beverage brands to personalise and market small batches of special brews in a cost-effective manner. Previously, the labelled cans could not be recycled because they contained so much other material besides the recyclable aluminium. The Vanish label is light enough to ensure that the quality of recycled aluminium is not affected, allowing all of the aluminium to be used again. Cans are also cheaper for breweries to produce and for consumers to buy than glass bottles.

• Capital light converting business • Engaged high performing people • Sustainable raw materials such as papers, films and chemicals

CAPITALS

OUR DIRECTION • Profitable organic growth, potentially complemented with acquisitions

Performance improved further Global demand for self-adhesive label materials continued to grow in 2016. In Europe and North America, demand growth remained on good level. In Asia and Latin America growth picked up. UPMRaflatac was able to capture the benefits of favourable market development due to its commercial improvements, competitive production platform and efficient distribution. Sales and service capabilities were improved and distribution coverage was enhanced through improved logistics solutions and new terminals. Cost efficiency was improved by focused investments, better production efficiency and quality as well as internal efficiency measures. UPMRaflatac’s deliveries increased by 3% in 2016, and all regions contributed to this. Growth in sales of films and special label products was stronger. Profitability increased mainly due to the improved sales margins and higher delivery volumes. Higher sales margins were mainly driven by a more favourable product mix and improved operational efficiency. Expansion to meet growing demand In October, UPMRaflatac announced EUR 35 million investment in the label stock factory inWroclaw, Poland. By introducing a new coating line together with related reel handling and slitting capacity additions, UPMRaflatac aims to meet the increasing demand for self-adhesive label stock in Europe. The investment further leverages UPMRaflatac’s unique competencies, end-use specific product offering and industry leading, optimally located operating platform in Poland. Production of the new line is planned to commence in the first half of 2018. Enhancing growth through product development UPMRaflatac’s capability to deliver innovative solutions to special end-use needs drives growth in high added value segments. Close partnerships with label printers and brand owners are an elementary part in building their brand and product appeal. Developments in adhesive technologies and product constructions for challenging end-use applications enhance growth opportunities. Innovations also secure productivity gains and leaps forward in responsibility and product safety. The importance of sustainability is growing Sustainability and product safety issues are growing in all markets. Brand owners lead the way and the development creates new growth opportunities for value creating partnerships throughout the self-adhesive label stock value chain. Being among the few operators with global scale and strong regional positions and high standards, UPMRaflatac is well positioned to take share and drive the key sustainability issues of recyclability and product safety together with brand owners, converters and rawmaterial suppliers as well as environmental organisations.

• Widening product portfolio especially in high value-added films and special label products • Expanding customer reach through increased distribution and sales and service coverage OUR STRENGTHS • Modern, strategically located and efficiently scalable production assets • Accurate and efficient supply chain and global delivery network • Global scale in R&D, quality development and technical know-how • Industry leader in sustainability and product safety GROWTH DRIVERS • Private consumption • Urban lifestyle • Population growth • Higher standard of living • E-commerce • Legislation • Self-adhesive labelling technology gaining market share • Brands and product innovations

UPM RAFLATAC VALUE CREATED

Read more: www.upmraflatac.com www.upmbiofore.com www.saimaanjuomatehdas.fi/en

Modern, efficient and strategically located label stock factories Efficient and accurate supply chain, responsive distribution network Global customer reach with sales and service Technical know-how, product development Responsible sourcing

• Label printers • Brand owners

END USES CUSTOMERS OUTCOMES

• Home and personal care • Food and beverages • E-commerce and retail • Transport and logistics • Pharmaceutical • Industrial, durables

• Safe and certified products • Employment and work safety

SOCIAL IMPACT

KEY FIGURES Sales, EURm

2016 2015

1,437

1,409

• Recyclable products,

ENVIRONMENTAL IMPACT

133 524 25.5

Comparable EBIT, EURm

102 581 17.6

waste recycling concept

Capital employed (average), EURm

Comparable ROCE, % Personnel on 31 Dec.

• End use brand appeal • ROCE • Growth

ECONOMIC IMPACT

3,062

2,894

CONTENTS

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UPM Annual Report 2016

UPM Annual Report 2016