UPM Annual Report 2018

First page Table of contents Previous page 44-45 Next page Last page

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

UPM PLYWOOD

Megatrends support our commercial strategy Global megatrends, like urbanisation, digitalisation, increase in living standards and environmental awareness, support UPMPlywood’s commercial strategy. The primary end uses are construction, vehicle flooring and liquefied natural gas (LNG) shipbuilding. Construction is the largest end use, accounting for more than half of our production volumes. Our strategy is to focus on demanding industrial applications and on high- and medium-range standard products. We aim to strengthen our market position in selected businesses by increasing value offerings. This is supported by our ongoing focused growth investment at the UPMChudovo mill in Russia to increase its birch plywood production capacity by 45,000 to 155,000 cubic metres. In addition to the production capacity growth, a new bio heat boiler will be built at the mill site. Investment continues according to schedule and is estimated to be completed by the end of Q3 2019. In April, we announced UPM Joensuu plywood mill’s power plant and scarf-jointing line replacement project in Finland. UPM Joensuu is producing WISA plywood mainly for truck and trailer floors and insulation components for LNG carriers. Sustainability-driven end-use segments In building and construction, our growth is driven by residential and commercial construction, renovation and civil engineering. We lead in high- and medium-range standard products in Europe. New innovative and sustainable solutions are further strengthening our offerings for construction applications. Responsible operations and certified products are highly valued by our wide customer base. Road transport is expected to remain the major mode of freight transport in Europe. Fleet replacement need is levelling, while relatively good economic activity is supporting trailer demand. Growing e-commerce volumes are driving growth in light vehicles. As a competitive advantage, WISA birch plywood has a positive EFFICIENCY MADE EASY OUR DIRECTION • Profitable growth through superior customer experience and operational excellence • Strengthen market position in selected businesses by increasing value and service offerings

UNDER EXTREME CONDITIONS

Vehicle flooring in heavy transport is under extreme stress every day. Trailers, trucks and other commercial vehicles require extra strength and durable, non-slip flooring materials. UPM Plywood’s new securing solution – WISA-TopGrip Evo2 – helps transportation companies to reduce waste, save time and improve work safety by eliminating the need for disposable friction mats under cargo. Replacing disposable friction mats with high-friction flooring is more sustainable for the environment and saves costs per truck load. Faster turnaround time directly translates to increased capacity, which improves the profitability of logistic operations. As a result of continued development, the friction properties of the panels have improved by 25% in comparison to the first-generation product.

ecological impact on fuel consumption, given its excellent weight-to- strength ratio compared with other materials (read more on the right). In the future, we seek growth by expanding to newmarkets and related end-use segments. Global environmental awareness promotes the use of gas over coal, and multi-source energy supply policies support LNG use. LNG use is growing, especially in Asia, which accounts for 70% of global LNG trade. We are the leading supplier of birch plywood for large LNG carriers. The LNG plywoodmanufacturing process is strictly certified, andWISA birch plywood is ideal for insulation in these vessels thanks to its strength and stability at –163°C. Our aim is to secure our leading position and extend our offerings to related applications with the same technology. Innovations for the products of the future UPMPlywood started using a new sustainable lignin-basedWISA BioBond gluing technology in plywood manufacturing in 2017. In this innovative technology, 50% of the fossil-based phenol has been replaced with lignin, which is obtained as a by-product of pulp production. In 2018, the proportion of this new sustainable bonding solution increased inWISA plywood production. With our fire-retardant structural plywood for building and construction end uses, we continued our commercial strategy of identifying new end-use applications. Fire-retardant treatment saves construction time, material and costs, as it allows simpler structures Plywood is an environmentally sustainable material because wood raw material stores carbon. PEFC™ and FSC® certificates guarantee that the wood rawmaterial is from sustainably managed forests with responsible logging operations. Compared with other materials, such as aluminium, plastic and steel, plywood manufacturing consumes significantly less energy. OUR STRENGTHS • End-use, market and customer insight and superior customer service • Leading reliability of supply, with consistent high quality • Leading supplier in demanding end-use segments • Strongest brand on the market: WISA ® • Operational excellence through skilled personnel that have the required fire-retardant capabilities. Ecological material from certified forests