UPM annual report 2014

UPM Biorefining

OUR DIRECTION

OUR STRENGTHS

Operating profit *) EUR million

• In Pulp, maintain cost competi- tiveness through continuous operational improvement, grow

• Modern, efficient pulp mills and business committed to growth • Versatile range of pulp grades suitable for a wide range of end uses • Own sales and service network for the global customer base • World-class logistic platform connecting continents • Sustainable fibre sourcing and outstanding environmental performance • Proprietary technology for wood-based renewable diesel • Competitive sawmills with skilled global sales • Synergistic operations from joint supply chain of wood raw materials for sawn timber, pulp and renewable diesel

300

KEY FIGURES

BUSINESSES 15–30

2013 1,988

2014 1,937

240

Sales, EURm

180

as a cost efficient producer through low-risk, high-yield debottlenecking investments,

300

Operating profit excl. special items, EURm Capital employed (average), EURm

217

2,825

2,862

120

10.6

ROCE excl. special items, %

7.6

60

2,376

Personnel on 31 Dec.

2,529

strategic sales co-operation and potentially through acquisitions • In Biofuels, commercialise the investment in the world’s first biorefinery producing wood- based renewable diesel and further develop UPM’s proprie- tary technology • In Timber, enhance profitability through efficient use of wood supply, operational excellence and sharpened commercial strategy

0

2012

2013

2014

*) excl. special items

Growth in pulp and start-up of the biorefinery

Benefits from integrated production In the UPM Biorefining business area, UPM combines integrated production of pulp, renew- able diesel and sawn timber with a joint supply chain of wood raw materials. Pulp mills pro- duce renewable energy in their recovery boilers and provide CO 2 -neutral biomass-based elec- tricity. As a residue of the pulp production, mills produce crude tall oil, which is the raw material in the biorefinery producing wood- based renewable diesel. Sawmills have a central

Business performance Operating profit decreased mainly due to lower hardwood pulp prices. Fixed costs increased due to maintenance shutdowns carried out at the UPM Kaukas and UPM Pietarsaari pulp mills in the first half of the year and ramp-up of the Biofuels organisation. The commission- ing phase of the biorefinery started in July, and commercial production of advanced renewable diesel began in January 2015. Profitability in sawmill operations improved thanks to further development in sales and production management.

Commercial production of wood-based renewable diesel began in Lappeen- ranta, Finland in January 2015.

UPM BIOREFINING VALUE CREATED

CAPITALS

OUTCOMES

FORESTRY AND WOOD SOURCING

PRODUCTION

SALES

CUSTOMERS

END USES

PULP • Tissue, • Packaging board, • Specialty paper and • Graphic paper producers

Safe and sustainable products Renewable energy Carbon storing products Low emissions Biodiversity Employment Work safety Community wellbeing ROCE

Capital intensive process industry Engaged high performing people Sustainable forest biomass from certified sources and with full traceability Sustainable forest management Responsible sourcing Intellectual property rights Community engagement

PULP oo Large modern mills oo Efficient production oo Combined heat and power production BIOFUELS oo World’s first biorefinery producing wood-based renewable diesel oo Proprietary technology oo IPR

PULP

oo Global sales oo Strategic sales co-operation oo World-class technical service

oo Professional sourcing organisation oo UPM’s certified forests in Finland oo UPM certified eucalyptus plantations in Uruguay oo Forestry services

BIOFUELS oo Regional biofuels sales

BIOFUELS • Fuel distributors

TIMBER oo Skilled global sales network

TIMBER • Construction, furniture, joinery industries

TIMBER oo Efficient sawmills

Synergistic operations in production integrates

Synergies in wood sourcing and raw materials

CONTENTS

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UPM Annual Report 2014

UPM Annual Report 2014