UPM Annual Report 2020

Change in net debt 2020

Free cash flow Free cash flow is primarily a liquidity measure. It is an important indicator of UPM’s overall operational performance as it reflects the cash generated from operations after investing activities.

Free cash flow

Reported in financing activities in cash flow statement

NON-CURRENT LOANS INCL. REPAYMENTS

NET DERIVATI- VES

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

1,500

LEASE LIABILITIES

CURRENT LOANS

EURm

1,200

Carrying value, at 1 January Change in net debt, cash Proceeds from non-current debt Payments of non-current debt

EURm

2020 2019

708

586

2

-159

-54

-1,536

-453

1,005

1,847

Operating cash flow Investing cash flow

900

-879 126 -693

-415

861

— —

— — — — — — — — — — — — — -2 -2

— — — — — — — —

— — — — — —

— — — — — — — — — — — — — — 13 13

861

Free cash flow

1,432

-31

-31 -86

600

EURm

-693

— — — — — —

-86

Dividends paid to owners of the parent company Dividends paid to non-controlling interests Contributions paid by non-controlling interests Transaction costs and discounts in operating cash flow Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow Other financing cash flow

Lease repayments

300

-23 67

— — — — — —

-2

Change in current liabilities Net cash flows from derivatives

21 -39

-17

-17 -10 -47

0

-4

-10

Transaction costs and discounts in operating cash flow Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow

16 17 18 19 20

-47

10

3

3

-197 -197

-197 473

Change in cash and cash equivalents

47

-6

820

-86

-17

-44

-3

-5

Change in net debt, non-cash New contracts and subsequent additions

Change in net debt, cash Change in net debt, non-cash Impact of adoption of IFRS 16

473

-711

1

64

— —

— — — — — — — —

65

36

78

5

5

Lease liability reassessments Fair value gains and losses Exchange gains and losses Effective interest rate adjustment

491 -142 -311 -453

4

15

20 -46

Change in net debt Opening net debt Closing net debt

509 -453

-35

-25

— — — —

1

— — —

1

56

-3 -8

3

Reclassification between non-current and current loans Liabilities related to assets classified as held for sale

-8

-39

44

3 2

15

36 56

Bonds

Carrying value, at 31 December

1,489

544

-161

-97

-1,720

NOMINAL VALUE ISSUED, MILLION

CARRYING VALUE 2020 EURm

CARRYING VALUE 2019 EURm

INTEREST RATE, %

Change in net debt 2019

FIXED RATE PERIOD

CURRENCY

Reported in financing activities in cash flow statement

1997–2027 2020–2028

7.450 0.125

USD EUR

375 750

411 741

431

NON-CURRENT LOANS INCL. REPAYMENTS

NET DERIVATI- VES

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

LEASE LIABILITIES

CURRENT LOANS

Value, at 31 December

1,153

431

EURm

Current portion

Carrying value, at 1 January Change in net debt, cash Proceeds from non-current debt Payments of non-current debt

669

588

9

-135

-64

-888

179

Non-current portion

1,153

431

13

— —

— — — — — — — — — — — — -7 -7

— — — — — — — 11 11

— — — — —

— — — — — — —

13

-6

-6

Leases Leases of property, plant and equipment where UPM, as a lessee, obtains substantially all of the economic benefits from the use of the identified asset and where UPM has the right to direct the use of the identified asset, are classified as leases. Approximately 33 % (30%) of leased assets recognised on the balance sheet consists of land areas in Uruguay, which the group uses for eucalyptus plantations. Approximately 34% (32%) of the leased assets on the balance sheet consist of five power plants. UPM uses the energy generated by these plants for its own production. In addition, the group has leased one waste water treatment plant as well as several warehouses, terminals, offices, railcars and vessels. UPM also leases some production machinery and equipment like forklifts and vehicles that are insignificant to the total leased assets portfolio.

— — — — — —

-82

-82

Lease repayments

In 2020, the total cash outflow for leased assets was EUR 86 (82) million. The expenses related to short-term leases recognised in the income statement in 2020 amounted to EUR 7 (9) million. The group had no significant variable lease payments in 2020. The lease commitments for leases not commenced at year-end 31 December 2020 totals approximately EUR 412 million, which are mostly related to long-term charter agreements, railway service agreement in Uruguay and service agreements related to wood handling, waste water treatment and other utilities in Leuna, Germany. Such lease commitments in 2019 amounted to approximately EUR 100 million.

— — — — —

-7

Change in current liabilities Net cash flows from derivatives

11

6 5

6 5

Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow

-649 -649

-649 -710

Change in cash and cash equivalents

7

-82

10

Change in net debt, non-cash New contracts and subsequent additions

76

— —

— —

76 -15 17

20 12

-35

Fair value gains and losses Exchange gains and losses Effective interest rate adjustment

5

— —

-1

1

1

1

32

81

-35

-1

1

78

Carrying value, at 31 December

708

586

2

-159

-54

-1,536

-453

182

UPM ANNUAL REPORT 2020 UPM FINANCIAL REPORT 2020 67 183

UPM ANNUAL REPORT 2020

UPM FINANCIAL REPORT 2020 66

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