UPM Annual Report 2019

Other financial information Alternative performance measures

Reconciliation of key figures to IFRS

EURm, OR AS INDICATED Items affecting comparability Impairment charges

Q4/19 Q3/19 Q2/19 Q1/19 Q4/18 Q3/18 Q2/18 Q1/18 Q1-Q4/19 Q1-Q4/18

-1

-11

-1

— — — — — -13

—

Restructuring charges

— -18

-28

-5

-10

— 18

— -52

9

UPM presents certain performance measures of historical performance, financial position and cash flows, which in accordance with the “Alternative Performance Measures” guidance issued by the European Securities and Markets Authority (ESMA) are not accounting measures defined or specified in IFRS and are therefore considered as alternative performance measures. These alternative performance measures are described below:

Change in fair value of unrealised cash flow and commodity hedges Capital gains and losses on sale of non- current assets Fair value changes of forest assets resulting from changes in estimates Total items affecting comparability in operating profit

-6

1

6

4

6

-3

-2

— 5

—

— 2

-2

— — — -2

30

— 29

— — — — 345

— — — — 345

ALTERNATIVE PERFORMANCE MEASURE DEFINITION Operating profit

-7

-26

-26

-1

340

-3

15

30

-60

382

Profit before income tax expense, finance expenses and finance income and net gains on sale of energy shareholdings as presented on the face of the IFRS income statement. Gains on sale of energy shareholdings are not recorded to the income statement from 2018 onwards.

Taxes relating to items affecting comparability Items affecting comparability, total

10

5

-1

— -68

1

-3 11

-9 21

14

-80 302

2

-21

-26

-1

272

-2

-46

Comparable EBIT

Operating profit adjusted for items affecting comparability.

Comparable EBITDA Operating profit

Comparable EBITDA

Operating profit before depreciation, amortisation and impairments, change in fair value of forest assets and wood harvested, share of results of associates and joint ventures and items affecting comparability.

336

316

319

373

744

417

349 385 1,344 1,895

Depreciation, amortisation and impairment charges excluding items affecting comparability Change in fair value of forest assets and wood harvested excluding items affecting comparability Share of results of associates and joint ventures Items affecting comparability in operating profit

Comparable profit before tax

Profit before income tax expense excluding items affecting comparability.

Comparable profit for the period

Profit for the period excluding items affecting comparability and their tax impact.

120

119

118

120

105

105

106

106

477

422

Comparable EPS, EUR

Earnings per share calculated in accordance with IFRS excluding items affecting comparability and their tax impact. Total of current and non-current debt less cash and cash equivalents and interest-bearing current and non-current financial assets. Certain non-operational or non-cash valuation transactions with significant income statement impact are considered as items affecting comparability, if they arise from asset impairments, restructuring measures, asset sales, fair value changes of forest assets resulting from changes in valuation parameters or estimates or changes in legislation or legal proceedings. In addition, the changes in fair value of unrealised cash flow and commodity hedges are classified as items affecting comparability. Numerical threshold for items to be considered as significant in UPM’s business areas UPM Biorefining, UPM Specialty Papers and UPM Communication Papers is determined as one cent (EUR 0.01) after tax per share or more. In other business areas, the impact is considered to be significant if the item exceeds EUR 1 million before tax.

-19

-5

3

-5

-35

-27

3

-3

-26

-63

Net debt

-1

-1

-1

-1

-1

-2

-1

-2

-3

-6

Items affecting comparability

7

26

26

1 -340

3

-15

-30

60 -382

Comparable EBITDA

442 455 466 488

473 497 442 456 1,851 1,868

% of sales

18.1 18.2

17.9 18.1 17.3 18.7

17.1 18.2

18.1

17.8

Comparable EBIT Operating profit

336

316

319

373

744

417

349 385 1,344 1,895

Items affecting comparability in operating profit

7

26

26

1 -340

3

-15

-30

60 -382

Free cash flow

Cash generated from operations after cash used for investing activities.

Comparable EBIT

343

342

345

374 404 420

334 355 1,404 1,513

% of sales

14.0 13.7 13.2 13.9 14.8 15.9 12.9 14.1 13.7 14.4

Return on equity (ROE), %

Profit for the period as a percentage of average equity.

Comparable profit before tax Profit before tax

Comparable ROE, % Return on equity (ROE) excluding items affecting comparability. Return on capital employed (ROCE), % Profit before taxes, interest expenses and other financial expenses as a percentage of average capital employed. Comparable ROCE, % Return on capital employed (ROCE) excluding items affecting comparability. Capital employed Group total equity and total debt. Business area’s comparable ROCE, % Business area’s operating profit adjusted for items affecting comparability as a percentage of business area’s average capital employed. Business area’s capital employed Business area’s operating assets less its operating liabilities. Operating assets include goodwill, other intangible assets, property, plant and equipment, forest assets, energy shareholdings, investments in associates and joint- ventures, inventories and trade receivables. Operating liabilities include trade payables and advances received.

324

319 300 364

731

401

337

371 1,307 1,839

Items affecting comparability in operating profit

7

26

26

1 -340

3

-15

-30

60 -382

Comparable profit before tax

331

345

325 366 390 404

322

341 1,367 1,457

Comparable ROCE, % Comparable profit before tax

331

345

325 366 390 404

322

341 1,367 1,457

Interest expenses and other financial expenses

14

10

11

8

7

9

8

9

44

33

346 355

337

374

397

413 330 350 1,411 1,490

Capital employed, average

11,323 10,996 11,069 10,946 10,259 9,817 9,712 9,755 11,024 10,176 12.2 12.9 12.2 13.7 15.5 16.8 13.6 14.3 12.8 14.6

Capital expenditure

Capitalised investments in property, plant and equipment, intangible assets including goodwill arising from business combinations, energy shareholdings and other shares, associates and joint ventures.

Comparable ROCE, %

Capital expenditure excluding acquisitions and shares Operating cash flow per share, EUR

Capital expenditure excluding investments in shares and participations.

Comparable profit for the period Profit for the period Items affecting comparability, total Comparable profit for the period

263

260

245 304

591

328

269 309 1,073 1,496

Operating cash flow divided by adjusted average number of shares during the period excluding treasury shares.

-2

21

26

1 -272

2

-11

-21

46 -302

261

281

271 305

319 330 258 288 1,119 1,194

Gearing ratio, %

Net debt as a percentage of total equity

Net debt to EBITDA

Net debt divided by EBITDA

Comparable EPS, EUR Comparable profit for the period

261

281 -14 267

271 305

319 330 258 288 1,119 1,194

Equity to assets ratio, %

Equity expressed as a percentage of total assets less advances received.

Profit attributable to non-controlling interest

2

— — 2

-2

— -1

-12

-1

263

271 305

321

328 258

287 1,106 1,193

Average number of shares basic (1,000)

533,324 533,324 533,324 533,324 533,324 533,324 533,324 533,324 533,324 533,324 0.49 0.50 0.51 0.57 0.60 0.61 0.48 0.54 2.07 2.24

Comparable EPS, EUR

Comparable ROE, % Comparable profit for the period

261

281

271 305

319 330 258 288 1,119 1,194

Total equity, average Comparable ROE, %

10,015 9,706 9,804 9,924 9,491 8,959 8,856 8,821 9,986 9,230

10.4 11.6

11.1 12.3 13.4 14.6 11.6 13.0

11.2 12.9

Quarterly key figures are unaudited.

214

215

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS

ACCOUNTS

OTHER FINANCIAL INFORMATION

OTHER FINANCIAL INFORMATION