UPM Annual Report 2021
ACCOUNTS FOR 2021
SPEARHEADS FOR GROWTH Our transformation is in an intensive phase, with growth investments totalling EUR 3.6 billion scheduled to be completed by the end of 2023.
FIBRES: A STRATEGIC GROWTH PROJECT IN URUGUAY
The construction of the mill was in its most intensive phase throughout 2021 and into early 2022. The mill will have an annual capacity of 2.1 million tonnes of eucalyptus market pulp. The USD 3.47 billion investment will raise our pulp production capacity by more than 50%. Given the expected highly competitive cash costs and the large scale of the mill, the invest ment is expected to significantly contribute to our future earnings.
Global consumer megatrends and the need to find more sustainable alternatives for fossil- based materials support the demand growth for market pulp. The requirements for competitive greenfield pulp operations are difficult to meet and provide a lasting competitive advantage. The production in our world-class pulp mill in Paso de los Toros in Uruguay and deliveries from a highly efficient pulp terminal at the port of Montevideo are scheduled to start up by the end of Q1 in 2023. The project and related plantation operations and logistics solutions have been carefully designed and prepared over the past decade to ensure that the pulp operation is competitive and sustainable, as well as in order to mitigate risks. Sustainable alternatives for fossil-based chemicals in consumer products and decarbonising traffic and aviation with renewable fuels create significant new business opportunities. Access to sustainable feedstocks, proprietary technology concepts and high-quality products are expected to provide a lasting competitive advantage. UPM Biochemicals is preparing for a com mercial-scale market entry. Our next generation biochemicals refinery in Leuna, Germany is scheduled to start production by the end of 2023. The biorefinery will have an annual capacity of 220,000 tonnes of wood-based biochemicals. The EUR 550 million investment is expected to meet our ROCE target of 14% once fully ramped up. UPM Biochemicals is also proceeding in commercialising its products. As an example, we develop wood Global consumer megatrends are driving de mand for appealing but sustainable and safe labelling and packaging solutions. We continue to expand in the specialty paper and self-adhesive label materials segments. Our focus is on expanding customer reach, and on continuously developing their product portfolio. Our strong position and innovations in these technically demanding and fast-growing niche segments of the pack aging value chain provide attractive growth opportunities. In 2021, demand for our speciality papers and self-adhesive label materials continued to grow rapidly, supported by e-commerce and
UPM Pulp on page 38 UPM Paso de los Toros on page 42
We have a well-balanced business portfolio, with most of the businesses in the growth phase of their lifecycle, generating attrac tive returns. We have also created a number of innovative new businesses, with large growth and value creation potential. Our graphic paper business is operating in a de clining market and is managed to generate consistent free cash flow. We have selected three spearheads for significant growth in the coming years. They are based on our long-term R&D work, deep know-how and high barriers to entry.
IMPACT • We create a future beyond fossils • We enable our customers and consumers to make more sustainable choices
OUR WAY • Sustainable and safe solutions • Strong long-term fundamentals for demand growth • High barriers to entry and a UPM competitive advantage • Strict return requirements • Talent attraction
BIOREFINING: TRANSFORMATIVE NEW BUSINESSES BEYOND FOSSILS
based recyclable PET bottles in co-operation with the Coca-Cola Company. We also launched UPM BioMotion™, the renewable functional fillers to significantly reduce the CO 2 footprint and weight of rubber and plastic applications. Currently, UPM Biofuels already supplies the markets with UPM BioVerno advanced renew able diesel and naphtha. The Lappeenranta Biorefinery has proven its proprietary technolo gy, product quality and sustainability, and has achieved commercial success. In January 2021, we proceeded into the basic engineering phase of a potential larger next generation biorefinery to scale up the business.
TARGETS • Earnings growth • Attractive returns • Successful commercialisation
UPM Biochemicals on page 56 UPM Biofuels on page 54
TOWARDS A FUTURE BEYOND FOSSILS
SPECIALITY PACKAGING MATERIALS: GROWTH AND PRODUCT INNOVATION
changes in consumer behaviour during the pandemic. UPM Raflatac’s investment in a new innovative linerless label production line was completed at the end of year. UPM Specialty Papers’ converted paper machine 2 at UPM Nordland, Germany reached good production during 2021.
CURRENT AND DEVELOPING SOLUTIONS
SPECIALTY PACKAGING MATERIALS
UPM Raflatac on page 46 UPM Specialty Papers on page 48
CO 2 -free energy
CIRCULAR BIOECONOMY – CLIMATE-POSITIVE FORESTRY – INCREASING BIODIVERSITY
UPM ANNUAL REPORT 2021
UPM ANNUAL REPORT 2021
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