UPM Annual Report 2017

Accounts

In brief

Strategy

Businesses

Stakeholders

Governance

Business area information for the year ended 31 December 2017

BUSINESS AREA

DESCRIPTION AND PRODUCTS

UPM SPECIALTY PAPERS

UPM PAPER ENA

ELIMINATIONS AND RECONCI- LIATIONS 2)

UPM BIOREFINING

UPM ENERGY

UPM RAFLATAC

UPM PLYWOOD

OTHER OPERATIONS

UPM Biorefining

UPM Biorefining consists of UPM Pulp, UPM Biofuels and UPM Timber business units. UPM has three pulp mills in Finland, one pulp mill and plantation operations in Uruguay, four saw mills in Finland and one biorefinery in Finland. UPM Pulp serves the global market with a comprehensive assortment of sustainably produced eucalyptus, birch and softwood pulp grades for a variety of tissue, specialty paper, board, printing and writing paper and other applications. UPM Biofuels produces innovative, advanced biofuels for transport. UPM Timber manufactures certified sawn timber from Nordic pine and spruce to joinery, packaging, distribution and construction industries. UPM Energy produces low emission electricity to the Nordic market. UPM Energy is the second largest electricity producer in Finland. UPM Energy operations include electricity generation, and operations in both physical electricity and financial portfolio management. UPM Energy assets consists of hydro power assets in Finland and shareholdings in energy companies.

EURm, OR AS INDICATED

GROUP

External sales Internal sales

1,958

120 1,495

1,111 4,592

463

274

–2 10,010

573

197

–

225

23

21

8

–1,046

–

Total sales

2,531

317 1,495

1,336 4,615 152 231

484

281

–1,048 10,010

Comparable EBIT

587

91

136

62

51

–18 1,292

Items affecting comparability in operating profit

–30 557

–

–

–

16

–

–

–19

–33

UPM Energy

Operating profit Finance costs, net

91

136

152 247

62

51

–38 1,259

–73

Income taxes

–212

Profit for the period

974

UPM Raflatac

UPM Raflatac is one of the world’s leading producers of self-adhesive label materials. UPM Raflatac supplies high-quality film and paper label stock for consumer product and industrial labelling.

Operating assets 1) Deferred tax assets

3,358 2,316

686

1,104 2,149

301

1,544

–291 11,167

423 141

Other non-operating assets

UPM Paper ENA

UPM Paper ENA (Europe & North America) is the world’s leading producer of graphic papers.

Other financial assets

1,337

Total assets

13,067

UPM Plywood

UPM Plywood manufactures high-quality plywood and veneer products mainly for construction and transport industries and the new thermo-formable wood material for the form pressing industry. Production facilities are located in Finland, Estonia and Russia.

Operating liabilities 1) Deferred tax liabilities

247

22

177

241 577

39

163

–260 1,206

458 939

UPM Specialty Papers

UPM Specialty Papers produces fine papers to Asian markets and label and packaging materials to global markets. Responsibly produced high performance papers are manufactured in China and Finland.

Other liabilities

Other financial liabilities

1,800 4,404

Total liabilities

Other operations

Other operations include wood sourcing and forestry, UPM Biocomposites, UPM Biochemicals business units and group services. Wood sourcing operations source wood raw material for sustainable and recyclable UPM products. UPM Biocomposites combines cellulose fibres and polymers into new high- performance products and materials. UPM Biochemicals wood-based biochemicals offer truly sustainable, competitive and high-quality solutions for various industries and applications.

Other items Change in fair value of forest assets and wood harvested Share of results of associates and joint ventures Depreciation and amortisation

33

–

–

–

–

–

69

–

103

2

–

–

–

1

–

2

–

5

–163

–9

–32

–80 –133

–23

–14

– –453

Impairment charges

1

–

–

–

3

–

–1

–

3

Capital employed, 31 December

3,111 2,293 3,225 2,267

509 502

863 1,572 885 1,702

262 267

1,381 1,465

–214 9,777 –95 10,217

Key performance indicators and financial targets

Average capital employed

Capital expenditure

135

27

47

28

51

29

11

–

329

Capital expenditure, excluding acquisitions and shares

135 18.2

2

46

28

51

29

11

– –

303 12.8

Comparable ROCE, % Personnel, 31 December

4.0

27.2

17.2 13.6 1,949 8,252

23.1

3.5 581

UPM aims to grow its comparable EBIT over the long term. The group has a portfolio of five businesses that operate on growing markets and one business that faces declining demand. All of UPM businesses are competitive and have strong market positions. Financial target setting, follow up and allocation of resources in the group’s performance management process is mainly based on the business area comparable EBIT and comparable ROCE. UPM presents comparable performance measures to reflect the underlying business performance and to enhance comparability from period to period. However the comparable performance measures used by management should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Business area information including description of items affecting comparability is presented below.

2,628

60 3,186

2,454

– 19,111

1) Business area’s operating assets include goodwill, other intangible assets, property, plant and equipment, forest assets, energy shareholdings, investments in associates and joint-ventures, inventories and trade receivables. Operating liabilities include trade payables and advances received. 2) Eliminations and reconciliations include the elimination of internal sales and internal inventory margin and the consolidation of MPI as a joint operation. In addition the changes in fair value of unrealised cash flow and commodity hedges that are not allocated to segments are included in reconciliations.

» Refer Note 10.2 Alternative performance measures, for definitions of key figures and reconciliation to measures presented in the consolidated income statement and balance sheet prepared in accordance with IFRS.

CONTENTS

ACCOUNTS

118

119

UPM Annual Report 2017

UPM Annual Report 2017