UPM Annual Report 2017

Accounts

In brief

Strategy

Businesses

Stakeholders

Governance

Consolidated cash flow statement

Notes to the consolidated financial statements The notes to the consolidated financial statements are grouped into sections based on their nature. The notes contain the relevant financial information as well as a description of accounting policy and key estimates and judgements applied for the topics of the individual notes. All amounts are shown in millions of euros unless otherwise stated.

EURm

2017

2016

Cash flows from operating activities Profit for the period

974 779

880 778

Adjustments 1) Interest received

2

6

Interest paid

–32

–40

Dividends received

10

4 8

Other financial items, net

–51

Income taxes paid

–216

–145

Items marked with this symbol describe the accounting principle applied by UPM to the specific financial statement area .

Items marked with this symbol indicate that the accounting area involves estimates and

Risks related disclosures, whether they are financial, actuarial, credit or counterparty in nature, can be found in sections marked with this symbol.

Change in working capital 2)

91

195

Operating cash flow

1,558

1,686

judgement which are described separately.

Cash flows from investing activities Capital expenditure

–305

–351

Acquisition of businesses and subsidiaries, net of cash acquired

–1

– –

Acquisition of energy shareholdings

–25 106

Proceeds from sale of property, plant and equipment and intangible assets Proceeds from disposal of shares in associates and joint ventures

93

3 1

– 6

Proceeds from disposal of energy shareholdings Net cash flows from net investment hedges

–3

–8 –2

Change in other non-current assets

3

Investing cash flow

–222

–262

Cash flows from financing activities Proceeds from non-current debt Payments of non-current debt Change in current liabilities Net cash flows from derivatives

1

1

–964

–540

–21 –97

–77 –22

1. Basis for reporting 1.1 Corporate information

The consolidated financial statements are presented in millions of euros, which is the functional and presentation currency of the parent company. Items included in the financial statements of each group subsidiary are measured using the currency of the primary economic environment in which the subsidiary operates (“the functional currency”). The amounts within parentheses refer to the preceding year, 2016. Figures presented in these financial statements are rounded and therefore the sum of individual figures might deviate from the presented total figure. Accounting policies The accounting policies applied to the consolidated financial state­ ments as a whole are described in this section, while the remaining accounting policies are described in the notes to which they relate as UPM aims to provide enhanced understanding of each financial statement area. Further, to provide a better understanding, the accounting choices made within the framework of the prevailing IFRS are described together with the policy. Key estimates and judgements In the process of applying the group’s accounting policies, manage­ ment has made a number of judgements and applied estimates of future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on management’s best knowledge, actual results and timing may ultimately differ from previously made estimates. Key estimates and judgement which are material to the reported results and financial position are presented in the following notes:

Dividends paid

–507

–400

Other financing cash flow

–17

–19

Financing cash flow

–1,604

–1,057

UPM-Kymmene Corporation (“the parent company” or “the company”) together with its consolidated subsidiaries (“UPM” or “thegroup”) is a global forest-based bioindustry group. UPM large product range covers pulp, graphic and specialty papers, self-adhesive labels, wood- based renewable diesel, electricity as well as plywood and timber products. UPM-Kymmene Corporation is a Finnish limited liability company, domiciled in Helsinki in the Republic of Finland. The address of the company’s registered office is Alvar Aallon katu 1, 00100 Helsinki, where a copy of the consolidated financial statements can be obtained. The parent company’s shares are publicly traded on the Nasdaq Helsinki Main Market. These group consolidated financial statements were authorised for issue by the Board of Directors on 31 January 2018. According to the Finnish Companies Act, the General Meeting of Shareholders is entitled to decide on the adoption of the company’s financial statements. 1.2 Basis of preparation UPM’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) and IFRIC Interpretations. The consolidated financial statements have been prepared under the historical cost convention, except for forest assets, energy share­ holdings and certain other financial assets and financial liabilities, defined benefit plan assets and obligations and share-based payment arrangements which are measured at fair value.

Change in cash and cash equivalents

–268

367

Cash and cash equivalents at beginning of period Exchange rate effect on cash and cash equivalents

992

626

–7

–1

Change in cash and cash equivalents

–268

367 992

Cash and cash equivalents at end of period

716

1) Adjustments EURm

2017 –103

2016

Change in fair value of forest assets and wood harvested Share of results of associates and joint ventures Depreciation, amortisation and impairment charges Capital gains and losses on sale of non-current assets

–88

–5

–5

450 –53

545 –55

Financial income and expenses

70

56

Income taxes

212 –45

200 –47

Utilised provisions

Non-cash changes in provisions

37

44

Other adjustments

216 779

128 778

Total

2) Change in working capital EURm

2017

2016

Inventories

–26 –68 184

41 22

Receivables included in working capital Liabilities included in working capital

132 195

Total

91

CONTENTS

ACCOUNTS

114

115

UPM Annual Report 2017

UPM Annual Report 2017