UPM Annual Report 2020

UPM BIOREFINING - PULP & TIMBER

FIBRES FOR THE FUTURE UPM combines the integrated production of pulp, timber and biofuels with a synergistic supply chain of wood-based raw materials.

CASE When the COVID-19 pandemic began, about 1,000 people worked at UPM’s 16 construction sites in Uruguay. At the end of the year, there were already 3,000 employees at the mill site, in the housing and the port of Montevideo. At the busiest stage of the construction, there will be more than 6,000 people at the sites. On our construction sites, work continued unin terrupted in compartmentalised teams. in 2020. Employees always work, live, commute and eat in the same group. If there’s a positive Coronavirus case, only a limited number of people are exposed. They THE PULP MILL PROJECT PROGRESSED DURING THE PANDEMIC Pulp is a versatile material meeting the global demand for responsible and renewable products. Our pulp is used for tissue papers, hygiene products, packaging board, labels and other specialty papers as well as printing and writing papers. What’s more, products made from pulp can be used to replace non-renewable materials like plastics. Long-term demand for pulp remains strong, driven by global megatrends. Growth in demand is strongest in China and the rest of the Asia-Pacific region. In 2020, global market pulp demand was significantly impacted by the COVID-19 pandemic, both positively and negatively. For tissue and hygiene products, the overall markets remained strong. However, the graphic paper end-use market clearly suffered from the pandemic and related

lockdowns. Global shipments remained well above the 2019 level and were 4% higher in 2020. In the UPM Timber business, we supply industrial customers in the furni ture, joinery, planning, construction and packaging sectors. Today, the construction industry is estimated to account for nearly 40% of energy-related CO 2 emissions. Replacing non-renewable raw materials in construction with responsibly produced timber is an effective solution for emis sion reduction. In 2020, UPMTimber continued to increase its efficiency and improve its performance, seizing opportunities created by the home improvement trend. UPM Timber also reached a significant milestone by achieving fossil-free production of sawn timber (read more on page 90).

World-class business processes Our target is to have world-class business processes in place across our operations and customer interface. Our commercial strategy focuses on solid value proposi tion, serving multiple end-use segments, preparing commercial capability for six million-tonne sales after 2022 and ensuring long-term profitability. In 2020, our pulp mills had a strong year of production. To strengthen our com petitiveness even further, we continued Products made from pulp can be used to replace non-renewable materials like plastics.

OUR DIRECTION • For pulp: To provide the most versatile pulp range, advanced technical service and a reliable long-term supply. To maintain cost-competitiveness through continuous operational improvement. To grow as a trusted and responsible pulp supplier. • For timber: To enhance profitability through efficient wood supply, integrated full production and focused commercial strategy. To have a streamlined business model that secures our position in chosen key markets and end-use segments. OUR STRENGTHS • Versatile selection of sustainably produced pulp grades for a wide range of end uses • Modern, efficient pulp mills and expert teams committed to grow with customers • Responsibility integrated into all operations from wood sourcing to logistics • Competitive sawmills with a dedicated global sales and logistics network

efforts to increase the efficiency of our pulp operations in Finland. We streamlined the operating model, optimised the cost struc ture and advanced digitalisation. The UPM Fray Bentos mill in Uruguay continued to break production records and also the environmental performance continued to be strong. As an integral part of the value chain, efforts to enhance wood supply continued in 2020. The value of utilising recent digital applications is also starting tomaterialise. In Finland, UPMsources wood fromprivate landowners, company-owned forests and import markets. InUruguay, wood is sourced from eucalyptus plantations that are owned by UPMand third-party landowners.

struction sites. UPM’s operations in China had first-hand knowledge of managing the situation, providing a model for well-functioning practices and their implementation. Strict measures and ongoing testing will continue to ensure health and safety of construction workers and progress of the project. During the pandemic, dialogue with local com munities has remained lively. In 2020, UPM host ed over 150 meetings and briefings with various stakeholders and more than 20 open sessions online and on several social media channels. Training for construction workers and entrepre neurs has also started successfully online.

KEY FIGURES

2020 2,183

2019 2,712

Sales, EURm

166

Comparable EBIT, EURm

544

3,620

Capital employed (average), EURm

3,469

4.6

Comparable ROCE, % Personnel on 31 Dec.

15.7

2,695

2,739

Comparable EBIT decreased due to lower pulp sales prices. Wood and other variable costs were lower. Fixed costs were higher due to the more expensive scheduled maintenance shutdowns in 2020. Global demand growth for chemical pulp was mainly driven by China. Good demand for advanced renewable diesel and naphtha continued. Demand for sawn timber was strong towards end of the year.

can be easily isolated, tested and monitored without exposing the whole site. In addition to random testing, all new employees are tested before they start working in any of the con

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UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020

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