UPM Annual Report 2018

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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

CONSISTENT PERFORMANCE UPM COMMUNICATION PAPERS

OUR DIRECTION • Maintain a strong, profitable market position while actively managing capacity in line with market developments • Evolve business through increasing the efficiency of our operations and the relevance and quality of our portfolio • Drive digitalisation by focusing on optimisation, building on analytics and robotics solutions, and extending digital solutions for our customer interface

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 • Clear and transparent sustainability agenda based on responsible operations, strong ethical values and a fully traceable supply chain

SAFETY IS MORE THAN NUMBERS

”Augsburg mill has developed a compre hensive zero accident action plan, including safety leadership on all levels, commitment and clear role models with exemplary management of changes.” This was the message when the mill was selected as the Best Improver in Safety. The mill has had zero UPM lost-time accidents since 2016 – a significant improvement on the previous years’ average lost time accident frequency (LTAF) of 5.9. Teams can get involved in various health and safety activities and collect points in an activity matrix. It is incentivised, which serves as a good initial motivator, and it helps the personnel understand that safety is a team effort. Clear roles and responsibilities set a framework for the safety culture. Thorough planning and straightforward processes are essential for maintaining and improving safety culture. The mill has implemented several ideas and measures to get closer to the long-term goal of zero incidents.

Maintaining cost competitiveness Our strategy is to strengthen our role as an industry leader through uncompromising performance, targeted innovation and commercial excellence. We continue to focus on stringent capacity management and continuous improvement in all parts of our operations. The decline in paper demand has been predictable and steady during recent years. While our focus has been on operational excellence to meet customer demand, we continued our tight cost management measures through fixed-cost reduction programmes across mills and sales offices. We made further improvements to variable cost management, focusing on energy and fibre purchasing. The development programme, which focuses on streamlining process and increasing efficiency through automation, was implemented at our Nordland mill in Germany. Digitalisation enabling future performance Our commitment to paper and our ambition to become the leading global supplier of graphic papers demand the evolution of our business and the processes that support it. Our digitalisation agenda supports our operational efficiency, e.g. through digital sourcing solutions, preventive maintenance pilot schemes, and robotics and automation solutions relating to the sales process. At the same time, we have extended our digitalisation roadmap to further develop our customer interfaces.

While we do not expect immediate changes in the technologies and approaches governing our customers’ approaches to purchasing, we are conscious of the rapid change driven by the increasing maturity of digital platforms and applications, as well as by generational shifts, that will take place in the coming years. Through an optimal use of digital solutions, we are sure to increase our relevance as an industry leader while continuing to drive efficiency throughout our internal processes. Sustainability as a differentiating factor UPMCommunication Papers is the world’s largest user of recovered paper for the production of graphic papers. Our target is to continuously reduce the emissions and waste related to our production. We focus on high environmental and social standards when sourcing our materials, and our wood rawmaterial comes from sustainably managed forests. We provide our customers with all relevant certificates and offer the most comprehensive range of EU Ecolabel-awarded products in the industry. Sustainability is increasingly becoming a differentiating factor in the market. We take a holistic approach to sustainability, focusing on rawmaterial sourcing, production, our role in society and the value we generate for our stakeholders and customers. Delivering these targets will enable our and our customers’ future business success.