UPM Annual Report 2017

Accounts

In brief

Strategy

Businesses

Stakeholders

Governance

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

Maturity table of debt at the end of 2017

EURm Bonds

2018

2019

2020

2021

2022

2023+

TOTAL

208

–

–

–

– 8 – 5 1 –

313

521

Loans from financial institutions

14 74

18

26

10

13

91 74

Pension loans Finance leases Other loans Current loans

– 7 4 –

–

– 5 1 –

–

Net debt

Free cash flow

7 2 5

49

105 165

31

174m

1,336m

1 –

158

EUR

EUR

–

5

(EUR 1,131m)

(EUR 1,424m)

Principal payments Interest payments

310

29 35

76 31

17 31

15 31

515 162

961 329

39

The difference between the above nominal values and carrying value of total debt arise from fair value adjustments increasing carrying value by EUR 151 million and other non-cash adjustments decreasing carrying value by EUR 11 million.

Maturity table of debt at the end of 2016

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 or cash 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 2017 was 6.9 years (5.3 years). UPM has some financial agreements which have gearing as a financial covenant whereby it should not exceed 110%.

EURm Bonds

2017

2018

2019

2020

2021

2022+

TOTAL

292

237 305

–

–

–

356

885 685 148 195 180

Loans from financial institutions

21 74 88

320

16

10

14

Pension loans Finance leases Other loans Current loans

74

– 8 1 –

–

– 5 – –

–

7 4

49

37

1

1 –

173

26

–

–

26

Principal payments Interest payments

502

628

328

65 36

15 35

581 218

2,118

88

50

41

468

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.

UPM’s capital

Liquidity and refinancing

Maturity table of derivatives and guarantees at the end of 2017

EURm

2017

2016

EURm

2017

2016

Cash at bank

666

590 402 656

Equity attributable to owners of the parent company

EURm

2018

2019

2020

2021

2022

2023+

TOTAL

8,660

8,234

Cash equivalents

50

Net settled interest rate swaps Net inflow

Non-controlling interest

4

3

Committed credit lines

657

21

12 –2

11

11

11

53

119

Total equity

8,663

8,237 1,835

of which used

–6

–5

Net outflow

–

–

–

–

–

–2

Non-current debt

789 324

Loan commitments

–46

–

Gross settled derivatives Gross currency swaps Total inflow

Current debt

585

Used uncommitted credit lines

–5

–26

Total debt

1,114

2,419

Long-term loan repayment cash flow

–306 1,010

–477 1,140

89

8

7

7

7

198

315

Total capitalisation

9,777 10,657

Liquidity

Total outflow

–78

–1

–2

–2

–3

–192

–278

Total debt

1,114

2,419

Forward foreign exchange contracts Total inflow

Less: Interest-bearing financial assets

–940 –1,289

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 programs in use are committed bilateral revolving credit lines.

356

– – –

– – –

– – –

– – –

– – –

356

Net debt

174

1,131

Total outflow Guarantees

–356

–356

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

2

14

2

2

0.11

0.73

1) Refer Note 10.2 Alternative performance measures.

Maturity table of derivatives and guarantees at the end of 2016

EURm

2017

2018

2019

2020

2021

2022+

TOTAL

Net settled interest rate swaps Net inflow

Repayments of debt at the end of 2017

Committed credit lines’ maturities (EUR 657million) at the end of 2017

52 –8

23 –7

14 –8

13 –6

12 –5

66 –4

180 –38

Net outflow

EURm

Gross settled derivatives Gross currency swaps Total inflow

EURm

500

500

400

400

302

101 –78

9

7

7

226

652

Total outflow

–371

–1

–2

–2

–193

–647

300

300

Forward foreign exchange contracts Total inflow

200

200

369

– – –

– – –

– – –

– – –

– – –

369

100

100

Total outflow Guarantees

–368

–368

2

2

0

0

23+

18

18

19 20 21 22 23+

19 20 21 22

CONTENTS

ACCOUNTS

■ Repayment ■ Interest

140

141

UPM Annual Report 2017

UPM Annual Report 2017