UPM annual report 2014
UPM Biofore strategy in action 2014
SHORT TERM PROFITABILITY PROGRAMMES
MID-TERM FOCUSED GROWTH PROJECTS
BUSINESS PORTFOLIO DEVELOPMENT AND VALUE CREATION
NEW BUSINESS DEVELOPMENT FOR LONG-TERM GROWTH
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New business structure facilitates UPM transformation and performance
studied during the year, but no significant trans- actions materialised. New business development reached a signifi- cant milestone when UPM Biofuels started its first biorefinery producing wood-based renew- able diesel as part of the UPM Biorefining business area. Focus on responsibility and leadership Corporate responsibility is an integral part of all our operations and is seen as a source of competitive advantage. UPM is strongly com- mitted to continuous improvement in economic, social and environmental performance. Over the past few years, UPM has focused heavily on improving safety at work and on further improv- ing the environmental performance of its pro- duction units. In 2014, special attention was also paid to responsible sourcing. Achieving our ambitious targets requires high performing people and teams to drive business transformation. This also highlights the importance of being an attractive employer with inspiring and empowering leaders who offer diverse opportunities to perform and grow. To ensure the success of our businesses and the people who make it happen, UPM’s manage- ment is placing particular emphasis on perfor- mance orientation and employee engagement.
Business area
Strategic targets
Actions in 2014
Actions planned for 2015 *)
UPM BIOREFINING
Grow in cost competitive, high quality pulp and advanced biofuels
Capacity expansions completed in UPM Pietarsaari and UPM Fray Bentos pulp mills, investment started at UPM Kymi
Complete the expansion in UPM Kymi
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2014 was the first full year of operation for UPM’s new business structure. The company consists of six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper ENA (Europe & North America) and UPM Plywood. Other operations include UPM’s wood sourcing and forestry and the UPM Biocomposites and UPM Biochemi- cals business units. Each business area has a defined strategic role and clear targets, outlined in the adjacent table. 2014 was a year of progress and showed that the new organisation is capable of delivering results. All of the businesses and group func- tions took part in the EUR 200 million profit improvement programme, launched in August 2013. The programme achieved its targets in Q3 2014, ahead of schedule. At that time, further improvement potential was identified and the company launched a second EUR 150 million profit improvement programme in November 2014. Organic growth projects progressed in UPM Biorefining, UPM Raflatac, UPM Paper Asia and UPM Energy. Most of the current projects are scheduled for completion by the end of 2015. Business portfolio development progressed through organic growth projects and continued forest land sales. M&A opportunities were also
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Ramp up production expansion at the UPM Pietarsaari and UPM Fray
Efficient sawn timber business
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Lappeenranta biorefinery started production
Bentos pulp mills
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Utilise synergies and increase added value in biorefining
Reduction in variable costs
Ramp up and optimise production in the UPM Lappeenranta biorefinery Participate in the EUR 150 million profit improvement programme Continue OL3 construction and refurbishment of hydropower plants Participate in the EUR 150 million profit improvement programme
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Improvement in efficiency and profitability in Timber
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UPM ENERGY
Profitable growth in Nordic low-emission power generation Value creation in physical trading and hedging
Successful hedging and physical trading and reduction in costs
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Continued OL3 construction
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Continued the refurbishment of hydropower plants
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UPM RAFLATAC
Profitable growth in higher value films and specialty labels and expand presence in developing markets
Reduction in fixed costs through optimisation of the production platform Coating operations were closed in Spain and in Australia and production was relocated Investment projects to increase production capacity in China, Malaysia and Poland started
Complete the investment projects in China, Malaysia and Poland Plan new slitting and distribution terminals in growth markets
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Global development in R&D
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Participate in the EUR 150 million profit improvement programme
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New slitting and distribution terminal opened in Mexico
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Read more on UPM’s responsible sourcing (p. 40) and safety improvement (p. 44).
UPM PAPER ASIA
Profitable growth in labelling materials globally and in high quality office papers in Asia
Construction of the third production unit started at UPM Changshu
Complete the investment project at UPM Changshu in China Participate in the EUR 150 million profit improvement programme Participate in the EUR 150 million profit improvement programme Close down four paper machines in Europe in early 2015
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Reduction in variable and fixed costs
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EVENTS IN 2014 22 January: UPM closes down the UPM Docelles fine paper mill in France 28 February: UPM proceeds with the construction of the third production unit at its Changshu mill in China 28 February: UPM announces its EUR 160 million investment in the Kymi pulp mill, Finland 3 April: UPM Raflatac announces its plans to increase labelstock production capacity in China and Malaysia 24 April: UPM Raflatac announces its plans to invest in new produc- tion capacity in filmic labelstock and restructure sheet labelstock businesses in Europe 12 June: The UPM Fray Bentos pulp mill completes the production permitting process in Uruguay and increases its production level to meet the mill capacity
UPM PAPER ENA
Improve profitability and maximise cash flow through cost competitiveness and customer focus
Significant reduction in variable and fixed costs
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16 June: UPM signs a sales agree- ment for the distribution of UPM BioVerno renewable diesel with North European Oil Trade Oy (NEOT) 11 September: UPM is listed as the industry leader in the global Dow Jones Sustainability Index 25 September: The Government of Finland decides not to grant an ex- tension to the decision-in-principle for the Olkiluoto 4 nuclear power plant unit 13 November: UPM introduces a new profit improvement target of EUR 150 million — UPM Paper ENA plans to reduce 800,000 tonnes of publication paper capac- ity in 2015
Simplified, customer segment-based organisation
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Closure of the UPM Docelles paper mill
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UPM PLYWOOD
Profitable growth in selected customer segments through operational excellence and customer service
Participate in the EUR 150 million profit improvement programme
Reduction in variable and fixed costs
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WOOD SOURCING AND FORESTRY
Secure competitive biomass
Participate in the EUR 150 million profit improvement programme
Reduction in wood costs
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BUSINESS PORTFOLIO DEVELOPMENT AND VALUE CREATION
Grow with synergistic acquisitions
Studied M&A opportunities, no significant transactions materialised
Continue to look for value enhancing M&A opportunities
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Simplify with best value realisation for UPM
Sold 51,000 hectares of forest land in Finland
Continue forest land sales
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Sold all 7,100 hectares of forest land in the UK
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NEW BUSINESS DEVELOPMENT
UPM Biocomposites: business creation in UPM Formi and continued growth in UPM ProFi biocomposites UPM Biochemicals: further application development and piloting of biofibrils and biochemicals
Biofuels started as a business within UPM Biorefining
Continue to expand UPM ProFi product portfolio. Continue to commercialise UPM Formi 4
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Partnership with Renmatix to test Renmatix’ Plantrose™ process in biochemicals
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Continue to develop biochemicals
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Development of lignin-based products
Continue studying technology and IPR commercialisation possibilities
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Commercialise technology and IPR innovations for core-related activities
Food freshness indicator technology commercialised to Indicatorium Ltd.
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CONTENTS
*) not a complete list
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UPM Annual Report 2014
UPM Annual Report 2014
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