UPM Annual Report 2017

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Businesses

In brief

Strategy

Stakeholders

Governance

Accounts

ONLY A FEW CLICKS AWAY UPM Paper ENA strives to increase efficiency and capture the many potentials of digitalisation to give room for innovation and business development. A good example of this is UPM’s new eOrder service, launched in 2017. The customer logs in, browses the digital catalogue, chooses the paper product, selects the desired quality and delivery date and submits the order. The order is then processed instantaneously as the eOrder online tool is integrated into the production process. The tool provides reliable real-time feedback on UPM’s order-fulfilment capabilities. Furthermore, UPM’s Customer Online digital portal offers functionalities that are uniquely tailored to the individual customer’s needs. This easy-to-use portal provides paper customers with full access to their inventory, account history, invoicing and order status.

UPM Paper ENA

Long-term commitment

OUR DIRECTION • Maximising cash flow and leveraging optimisation opportunities in extensive, highly performant operations • Strengthening market position through differentiated commercial strategies, business development and targeted product development • Increasing efficiency of operations and fostering digitalisation and robotics • Targeted investments in maintenance development OUR STRENGTHS • Long-term commitment to paper and reliability of supply • Broad portfolio and strong geographical presence • High product and service quality • Extensive, thoroughly optimised production • Proven ability to manage operations ahead of market development • Clear and transparent sustainability agenda based on responsible operations, strong ethical values and a fully traceable supply chain

Strong performance continued UPMPaper ENA strengthened its position by continuing a consistent level of performance management. Capacity management stayed stringent, cost- reduction measures were implemented and the commercial strategy progressed well. Profitability remained solid, albeit decreased from the previous year’s high level mainly due to significantly higher fibre costs. UPMPaper ENA’s improved commercial footprint and high reliability of supply paid off. Deliveries decreased 2%, less than the overall market demand. The key financial metric – free cash flow – remained strong due to the good profitability level, the further reduction in working capital and the sale of hydropower facilities. Long-term commitment – steps for future success In 2017, UPMPaper ENA launched new paper products, strengthening customer relationships and benefitting customers’ businesses. The improved offering enables commercial printers to grow their business and increase press utilisation, while allowing UPMPaper ENA to enter new profitable end-uses. Print quality was also improved and new fibre alternatives were introduced to meet varied customer needs. The differentiated commercial strategies allowed UPMPaper ENA to successfully reach out to new customers. UPMPaper ENA continues to strengthen its operations and customer interface with targeted innovations. The eOrder service, a new innovative digital ordering solution, was launched in 2017. The service is a groundbreaking online tool enabling speedy, transparent round-the-clock order fulfilment (read more on the next page). Furthermore, innovative approaches to maintenance were introduced in order to maintain high level of operational efficiency in the future. Maintaining cost competitiveness UPMPaper ENA adjusts its operations to prospective customer demand with timely capacity adjustments and cost reduction. Machine closures in 2016 and further actions in 2017 supported high asset utilisation rates. UPM closed 305,000 tons of magazine paper capacity in Europe and contract manufacturing ceased at the divested Schwedt newspaper mill in Germany. In December, UPM closed 128,000 tons of magazine paper capacity at the UPMBlandin mill inMinnesota, USA. In November, UPM announced a plan to streamline internal processes and invest in automation at UPMNordland Papier and UPMNorService in Germany. Variable cost reduction measures targeted in particular fibre, energy and logistics costs. UPMPaper ENA also proceeded with dedicated programmes to lower fixed costs across mills and offices. Paper is a true Biofore product Paper is a renewable material and can be recycled efficiently. Products are sustainable over their entire lifecycle, from forest to recycling. The wood raw material is sourced from sustainably managed forests and the production process complies with the occupational health and product safety requirements, and minimises impact, waste and consumption of water and energy. UPMPaper ENA provides customers with EU Ecolabel-awarded products from all its European mills, having the most comprehensive offering of papers carrying the EU Ecolabel mark in the industry. UPMPaper ENA is committed to responsible sourcing standards and actively fosters employee development and diversity. At mills and other business sites, UPMPaper ENA is an active partner to communities and a respected employer.