UPM Annual Report 2019

Notes to the consolidated financial statements

Consolidated cash flow statement

RESTATED *)

EURm

2019

2018

Cash flows from operating activities Profit for the period

The notes to the consolidated financial statements are grouped into sections based on their nature. The notes contain the relevant financial information as well as a description of accounting policy and key estimates and judgements applied for the topics of the individual notes. All amounts are shown in millions of euros unless otherwise stated.

1,073

1,496

Adjustments 1) Interest received

719

301

2

2

Interest paid

-29

-15

Dividends received

2

2

Other financial items, net

-20

-20

Income taxes paid 3)

-176 276

-228 -209 1,330

Change in working capital 2)

1,847

Operating cash flow

Cash flows from investing activities Capital expenditure

-359

-303

Additions to forest assets

-44

-49

Proceeds from sale of property, plant and equipment and intangible assets, net of tax

13

32

1. Basis for reporting

Proceeds from sale of forest assets, net of tax Proceeds from disposal of energy shareholdings Net cash flows from net investment hedges

2 1

110

1

-29

16 -4

1.1 Corporate information UPM-Kymmene Corporation (“the parent company” or “the company”) together with its consolidated subsidiaries (“UPM” or “the group”) is a global forest-based bioindustry group. UPM large product range covers pulp, graphic and specialty papers, selfadhesive labels, wood-based renewable diesel, electricity as well as plywood and timber products. UPM-Kymmene Corporation is a Finnish limited liability company, domiciled in Helsinki in the Republic of Finland. The address of the company’s registered office is Alvar Aallon katu 1, 00100 Helsinki, where a copy of the consolidated financial statements can be obtained. The parent company’s shares are publicly traded on the Nasdaq Helsinki Main Market. These group consolidated financial statements were authorised for issue by the Board of Directors on 30 January 2020. According to the Finnish Companies Act, the General Meeting of Shareholders is entitled to decide on the adoption of the company’s financial statements. UPM’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) and IFRIC Interpretations. The consolidated financial statements have been prepared under the historical cost convention, except for forest assets, energy shareholdings and certain other financial assets and financial liabilities, defined benefit plan assets and obligations and share- based payment arrangements which are measured at fair value. The consolidated financial statements are presented in millions of euros, which is the functional and presentation currency of the parent company. Items included in the financial statements of each group subsidiary are measured using the currency of the primary economic environment in which the subsidiary operates (“the functional currency”). The amounts within parentheses refer to the preceding year, 2018. Figures presented in these financial statements are rounded and therefore the sum of individual figures might deviate from the presented total figure. 1.2 Basis of preparation

Accounting policies The accounting policies applied to the consolidated financial statements as a whole are described in this section, while the remaining accounting policies are described in the notes to which they relate as UPM aims to provide enhanced understanding of each financial statement area. Further, to provide a better understanding, the accounting choices made within the framework of the prevailing IFRS are described together with the policy. Key estimates and judgements In the process of applying the group’s accounting policies, management has made a number of judgements and applied estimates of future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on management’s best knowledge, actual results and timing may ultimately differ from previously made estimates. Key estimates and judgement which are material to the reported results and financial position are presented in the following notes.

Change in other non-current assets

1

-415

-199

Investing cash flow

Cash flows from financing activities Proceeds from non-current debt Payments of non-current debt **)

13 -6

0

-324

Lease repayments **)

-82

-7

Change in current liabilities Net cash flows from derivatives

-7 11

4 0

Dividends paid

-693

-613

Contributions by non-controlling interests

21

—

Other financing cash flow

-39

-19

-783

-959

Financing cash flow

649

172

Change in cash and cash equivalents

Cash and cash equivalents at beginning of period Exchange rate effect on cash and cash equivalents Change in cash and cash equivalents Cash and cash equivalents at end of period

888

716

-1

0

649

172 888

1,536

*) Accounting policy change of forest renewal costs. **) Repayments of finance leases under IAS 17 have been reclassified from Payments of non-current debt to Lease repayments. 1) Adjustments EURm

2019

2018 -407

Change in fair value of forest assets and wood harvested Share of results of associated companies and joint ventures Depreciation, amortisation and impairment charges Capital gains and losses on sale of non-current assets

-26

KEY ESTIMATES AND JUDGEMENTS NOTE Valuation of forest assets

-3

-6

4.2 Forest assets

490

422 -47

Fair value determination of energy shareholdings Impairment of property, plant and equipment Impairment of goodwill and other intangible assets Pension and other post-employment benefits

4.3 Energy shareholdings

-1 37

Financial income and expenses

56

4.1 Property, plant and equipment

Income taxes

234 -29

342 -35

Utilised provisions

4.4 Goodwill and other intangible assets

Non-cash changes in provisions

43

-21

Other adjustments

-25 719

-4

3.4 Retirement benefit obligations

301

Total

Income taxes

7. Income tax 4.5 Provisions 9.2 Litigation

Environmental provisions

2) Change in working capital EURm

Legal contingencies

2019 282 270 -276

2018 -317

Inventories

Receivables included in working capital Liabilities included in working capital

-50 158

276

-209

Total

3) Total income taxes paid in 2019 amounted to EUR 176 million (252 million).

148

149

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS

ACCOUNTS

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS