UPM Annual Report 2019

5. Capital structure

Maturity table of debt at the end of 2019

EURm Bonds

2020

2021

2022

2023

2024

2025+

TOTAL

UPM has a strong cash flow and industry-leading balance sheet that mitigates risks and enables value-enhancing strategic actions.

—

—

—

—

— 334

334

Loans from financial institutions

16 83

10 68

6

18 49

1

1

53

Lease liabilities 1)

53

43

290 174

586 179

Other loans Current loans

1 2

1

1

1

1

—

—

—

—

—

2

Net debt

Free cash flow

102

79 43

60 42

68 41

45 40

799 168

1,154

Principal payments Interest payments

45

379

-453 m

1,432 m

EUR

EUR

1) Value of lease liabilities increased due to the implementation of the new standard IFRS 16 Leases

(EUR -311m)

(EUR 1,131m)

The difference between the above nominal values and carrying value of total debt arise from fair value adjustments increasing carrying value by EUR 152 million and other non-cash adjustments decreasing carrying value by EUR 9 million.

Maturity table of debt at the end of 2018

5.1 Capital management UPM’s objective for managing capital comprising of net debt and total equity is to ensure maintenance of flexible capital structure to enable the ability to operate in capital markets and maintain optimal returns to shareholders. The group manages its financing activities, debt portfolio and financial resources via various policies that are designed to ensure optimum financing arrangements minimising simultaneously financial expenses and refinancing risk and optimising liquidity. Borrowing activities are centralised to the parent to the extent possible and cash resources are distributed within the group by the central treasury department. UPM targets a net debt to EBITDA ratio of approximately 2 times or less.

EURm Bonds

2019

2020

2021

2022

2023

2024+

TOTAL

Liquidity and refinancing EURm

—

—

—

—

— 328

328

2019 977 559

2018

Loans from financial institutions

4 7 1 9

13 49

8 5 1

3 5 1

15

2

44 98

Cash at bank

784 104

Lease liabilities Other loans Current loans

4 1

27

Cash equivalents

4

169

176

Committed credit lines

7

7

—

—

—

—

—

9

of which used

-4

-5

22 36

66 32

13 32

9

20 32

525 137

654 302

Principal payments Interest payments

Loan commitments

-47

-47

32

Used uncommitted credit lines

-2

-9

Long-term loan repayment cash flow 1)

-99

-13

The difference between the above nominal values and carrying value of total debt arise from fair value adjustments increasing carrying value by EUR 133 million and other non-cash adjustments decreasing carrying value by EUR 10 million.

Liquidity 821 1) Total debt increased in 2019 as a result of the implementation of IFRS 16 Leases 1 January 2019. Cash and cash equivalents comprise cash in hand, deposits held at banks and with original maturities of three months or less. Bank overdrafts are included in used uncommitted credit lines and presented within current debt in the balance sheet. In 2019, no impairment and no expected credit losses were recognised in profit or loss for loan receivables or cash and cash equivalents. 1,391

Maturity table of derivatives included in net debt and guarantees at the end of 2019

UPM’s capital EURm

2019

2018

EURm

2020

2021

2022

2023

2024

2025+

TOTAL

Equity attributable to owners of the parent company

10,062

9,792

Net settled interest rate swaps Net inflow

Non-controlling interest

113

5

14 —

15

15

15

14 —

40

112

Total equity

10,175

9,797

Net outflow

—

—

—

—

-1

Non-current debt

1,195

753

Gross settled derivatives Gross currency swaps Total inflow

Current debt

104

25

Total debt

1,299

778

7

7

7

7

7

204 -175

239 -181

Total capitalisation

11,474 10,575

Total outflow

-1

-1

-1

-1

-2

Total debt

1,299 1,752 -453

778

Forward foreign exchange contracts Total inflow

Less: Interest-bearing financial assets

1,089

325 -326

— — —

— — —

— — —

— — —

— 325 — -326

Net debt

-311

Total outflow Guarantees

Gearing ratio, % 1) Net debt to EBITDA 1)

-4

-3

2

—

2

-0.24 -0.17 1) Refer » Other financial information on Alternative performance measures.

Maturity table of derivatives included in net debt and guarantees at the end of 2018

EURm

2019

2020

2021

2022

2023

2024+

TOTAL

Liquidity and refinancing risk

Net settled interest rate swaps Net inflow

11 -2

11 —

11 —

11 —

11 —

40

95

Loans Leases

UPM seeks to maintain adequate liquidity under all circumstances by means of efficient cash management and restricting financial investments to investment types that can readily be converted into cash. Adequate liquidity is maintained by keeping sufficient amount of unused committed credit lines or cash as a reserve. Refinancing risks are minimised by ensuring a balanced loan portfolio maturing schedule and sufficiently long maturities. The average loan maturity at 31 December 2019 was 7.5 years (8.0 years).

Net outflow

—

-2

Gross settled derivatives Gross currency swaps Total inflow

10 -1

7

7

7

7

205 -187

242 -195

Total outflow

-1

-2

-2

-3

Forward foreign exchange contracts Total inflow

409 -410

— — —

— — —

— — —

— — —

— 409 — -410

Total outflow Guarantees

2

—

2

178

179

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS

ACCOUNTS

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS