UPM Annual Report 2018

UPM AT A GLANCE

STRATEGY

BUSINESSES

SOCIETY AND ENVIRONMENT

GOVERNANCE AND COMPLIANCE

REPORT OF THE BOARD OF DIRECTORS

FINANCIAL STATEMENTS

AUDITOR’S REPORT

OTHER FINANCIAL INFORMATION

Change in net debt 2017

Leases UPM has three finance lease agreements regarding power plant machinery outstanding at the end of 2018. The group uses the energy generated by these plants for its own production. The group also has a finance lease arrangement over the usage of a waste water treatment plant. In addition, the group leases certain production assets and buildings under long term finance lease arrangements.

Reported in financing activities in cash flow statement

NON-CURRENT LOANS INCL. REPAYMENTS

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

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

–2,082

–195

–26

112

68

992 –1,131

–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

Leased assets included in property, plant and equipment

97

EURm

2018

2017

2

2

Accumulated costs

153 –66

152 –58

– –

– – 7 – 2 –

– –

– –

–5

–5

Accumulated depreciation

–268 –268

–268

Carrying value, at 31 December

88

94

956

21

97

–3

810

Change in net debt, non-cash Fair value gains and losses Exchange gains and losses

50 90 –5

– – – – –

–66

–16

The group also leases office, manufacturing and warehouse space through various non-cancellable operating leases. Certain contracts contain renewal options for various periods of time.

– – –

–1

–7

84 –5 84

Effective interest rate adjustment

– 3 2

– –

Other non-cash changes

81 83

135

–66 143

–7

148

Carrying value, at 31 December

–991

–105

–5

68

716

–174

Future minimum lease payments

Finance leases

Operating leases

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.

EURm

2018

2017

2018

2017

Within 1 year

8

8

90

77

Between 1 and 5 years

66 28

69 32

226 238 554

203 183 463

Later than 5 years

Total

102

110

Of which interest

–5 98

–6

– –

– –

Present value of future minimum lease payments

105

EURm

2018

2017

Operating cash flow Investing cash flow

1,391 1,558

–260

–222

EURm Free cash flow

Free cash flow Dividends paid

1,131 1,336

–613

–507

5.3 Financial assets and liabilities by category Financial assets and liabilities recognised in the balance sheet include cash and cash equivalents, loans and other financial receivables, investments in securities, trade receivables, trade payables, loans, bank overdrafts and derivatives. Classification of financial assets into different measurement categories depends on the contractual cash flow characteristics and the business model for managing the financial asset. The measurement category of each financial asset is determined at inception. In the comparison period, classification was dependent on the purpose for which the financial assets were acquired. Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right in all circumstances to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

1,500

Accounting policies

Other financing cash flow

–19

–17

Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow Change in net debt, cash Change in net debt, non-cash

1,200

–7

2

900

Leases Leases of property, plant and equipment where the group, as a lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are recognised as assets and liabilities in the balance sheet at the commencement of lease term at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each finance lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other non-current debt. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made as a lessee under operating leases are charged to the income statement on a straight-line basis over the period of the lease. UPM will apply IFRS 16 Leases from 1 January, 2019. » Refer Note 10.1 Forthcoming new standards, amendments and accounting policy changes for more information.

600

3

–5

495 –10 485

810 148 957

300

0

Decrease in net debt

14 15 16

18 17

Opening net debt Closing net debt

174

1,131

–311

174

Bonds

NOMINAL VALUE ISSUED, MILLION

CARRYING VALUE 2018 EURm

CARRYING VALUE 2017 EURm

INTEREST RATE, % CURRENCY

FIXED RATE PERIOD

1997–2027 2003–2018

7.450 5.500

USD USD

375 250

405

405 208 613 208 405

Value, at 31 December

405

Current portion

Non-current portion

405

156

157

CONTENTS

ACCOUNTS

UPM ANNUAL REPORT 2018

UPM ANNUAL REPORT 2018

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