UPM Annual Report 2017

Accounts

In brief

Strategy

Businesses

Stakeholders

Governance

5.2 Net debt

Change in net debt 2016

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 financial assets. Net debt totalled EUR 174 million at the end of 2017 (1,131 million). Following the strong cash flow during 2017, the group was able to reduce net debt by EUR 957 million.

FINANCE LEASES

CURRENT LOANS

NET DERIVATIVES

EURm

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

–1

– 7 – –

– –

– – –

– – – –

– – – –

–1

533

540

Net debt

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

EURm Net debt

EURm Bonds

2017

2016

Gearing %

–

–

–

–

13

–

13

405

717 664

3,500

50

Loans from financial institutions

78

–

–

–

–

2 –

–

2

2,800

40

Pension loans Finance leases

–

77

367 367

367

2,100

30

97

106

532

7

77

22

15

1,020

Derivatives Other loans

–

34

1,400

20

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

209 789 306

236

55 11 –8

– – –

– 1 – – 1

–105

– – – – –

–

–50

700

10

Non-current debt

1,835

– – –

–1

11 –8 –4

0

0

Repayments of non-current debt

477

13

14 15 16 17

– –

Derivatives

13

82 26

Other non-cash changes

–

–4 –4

Other liabilities Current debt

5

58

–105

–1

–51

324

585

Carrying value, at 31 December

–2,082

–195

–26

112

68

992

–1,131

Total debt

1,114

2,419

Accounting policies

Loan receivables

7

11

Derivatives

148

216

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.

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.

Other receivables

34

32

Non-current interest-bearing assets

189

259

Loan receivables

5 8

6

Derivatives

12 19

Other receivables

21

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

716 751 940

992

1,030 1,289

EURm

2017

2016

Net debt

174

1,131

Operating cash flow Investing cash flow

1,558 –222 1,336 –507

1,686 –262 1,424 –400

Free cash flow Dividends paid

EURm Free cash flow

Other financing cash flow

–17

–19

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

Change in net debt 2017

1,500

2

13

Reported in financing activities in cash flow statement

1,200

–5

2

900

NON-CURRENT LOANS INCL. REPAYMENTS

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

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

810 148 957

1,020

FINANCE LEASES

CURRENT LOANS

NET DERIVATIVES

600

–51 969

EURm

Decrease in net debt Opening net debt

300

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

–2,082

–195

–26

112

68

992 –1,131

–1,131 –2,100

0

Closing net debt

–174

–1,131

13

14 15 16 17

–1

– 7 – –

– –

– – –

– – – –

– – – –

–1

957

964

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

– –

21

21 97

Bonds

–

97

–

–

–

–

2

–

2

CARRYING VALUE 2017 EURm

CARRYING VALUE 2016 EURm

NOMINAL VALUE ISSUED, MILLION

INTEREST RATE, % CURRENCY

FIXED RATE PERIOD

– –

– – 7 – 2 –

– –

– –

–5

–

–5

1997–2027 2002–2017 2003–2018

7.450 6.625 5.500

USD GBP USD

375 250 250

405

471 293 246

–

–268 –268

–268

–

956

21

97

–3

810

208 613 208 405

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

Value, at 31 December

1,010

50 90 –5

– – – – –

–66

–

–

–16

Current portion

292 718

– – –

–1

–7

84 –5 84

Non-current portion

– 3 2

– –

Other non-cash changes

–

81 83

135

–66 143

–7

148 –174

Carrying value, at 31 December

–991

–105

–5

68

716

CONTENTS

ACCOUNTS

142

143

UPM Annual Report 2017

UPM Annual Report 2017