UPM annual report 2014

UPM Raflatac

INVISIBLE NEVER LOOKED SO GOOD

UPM Raflatac launched a new VANISH™ range of ultra-thin, invisible clear film labelstocks in 2014. VANISH™ clear PET films are ideal for beverage, personal care and food package labelling. These labels fit perfectly in applications where resistance against water, oil and chemicals is important, as they offer the exceptional combination of strength, good stability and excellent chemical resistance. With new VANISH™ labels, brand owners can maximize brand representation as well as realise new productivity gains and reductions in packaging materials throughout their processes.

OUR DIRECTION

OUR STRENGTHS

• Profitable growth through organic growth, product portfolio development and synergistic acquisitions • Growth in high value added films and speciality label products • Expand presence in rapidly- growing developing markets

• Accurate supply chain and efficient delivery network • Modern strategically-located production assets • Second largest supplier in most markets with global scale in R&D, quality development and technical know-how

BUSINESSES 15–30

Read more: www.upmraflatac.com/vanish

KEY FIGURES

2013 1,213

2014 1,248

Sales, EURm

75

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

80

532 14.1

530 15.1

ROCE excl. special items, %

2,869

Personnel on 31 Dec.

2,847

Stable profitability and growth in deliveries

Business development In parallel with the implementation of its growth strategy, UPM Raflatac has continued with efficiency improving measures in order to make full use of its production platform and distribution network. Investments and restruc- turing have taken place to reflect market demand in developed and growth markets and maximise cost competitiveness. In developed markets such as Western Europe and North America, UPM Raflatac has continuously strengthened its offering in films and speciality products. Efforts have focused on distribution, marketing and prod- uct development in parallel with complemen- tary acquisitions which have enhanced growth. In April, to secure cost competitive growth in films, UPM Raflatac announced plans to increase production capacity for its film label- stock business in Europe by investing in a new coating line in Nowa Wies, Poland. This growth investment of approximately EUR 13

million is part of UPM’s focused growth projects. Following this investment, a silicon- ising line in Tervasaari, Finland was closed. As part of UPM Raflatac’s efficiency improving measures, the sheet labelstock busi- ness closed down coating operations and reduced capacity in sheet finishing in Polinya, Spain. Sheet coating is being centralised at Nowa Wies, Poland. The coating operations in Melbourne, Australia and in Polinya, Spain were also closed. In growth markets such as Eastern Europe, Latin America and Asia, UPM Raflatac has significantly enhanced its service and manufacturing network by investing in new technology and opening new slitting and distribution terminals in past years. In 2014 a new terminal was opened in Mexico, and more openings are planned for growth mar- kets in 2015.

In April, UPM Raflatac announced plans to increase production capacity by more than 50% in Asia. The investment of approximately EUR 14 million is part of UPM’s focused growth projects. Both growth investments are expected to be completed in Q1 2015. UPM’s labelstock business has seen a rapid growth in Asia and the planned capacity allows UPM to respond to the increasing demand with improved quality and cost competitive- ness. UPM Raflatac’s sales increased by a strong 10% in growth markets in 2014 com- pared to 2013. Markets and drivers • The global label materials market has a robust growth outlook, driven by an expanding middle class and the private consumption of branded and packaged goods. Thanks to its versatility and brand appeal, self-adhesive labelling as a technol-

ogy is increasing its market share among labelling solutions. • In 2014, global demand for label materials is estimated to have increased by 4% compared to the previous year. • Label materials have a wide range of end uses, of which 80% is driven by private consumption and 20% by industrial appli- cations. • Growth rates are strongest in Asia, Latin America and Eastern Europe, thanks to faster urbanisation, an expanding middle class and increasing income levels. Demand is further supported by the rapid development of retailers, distributor networks and automated product label- ling. • In the mature markets of Western Europe, the United States and Japan, growth is mainly driven by product renewal and tailored solutions. Increased private con- sumption also increases demand.

Business performance Operating profit increased mainly due to higher delivery volumes and lower fixed costs, more than offsetting the adverse sales margin and currency impacts.

Operating profit *) EUR million

100

80

60

40

20

0

2012

2013

2014

*) excl. special items

UPM RAFLATAC VALUE CREATED

CAPITALS

OUTCOMES

SELF-ADHESIVE LABELSTOCK FACTORIES o o Modern o o Efficient o o Strategically located

DISTRIBUTION AND SLITTING

SALES AND SERVICES

CUSTOMERS

LABEL USING INDUSTRIES

END USES

Home & Personal care Food & Beverage Retail A4 and cut-size Pharmaceutical Transport & Logistics Durables Tyres

Label printers

Capital light converting business Engaged high performing people Responsible sourcing Face paper Release paper Films Adhesives Silicones

Safe and certified products Brand appeal Work safety Employment Recyclable products RafCycle – waste recycling concept ROCE

NETWORK o o Optimised

o o Loyal relationships o o Global scale o o Technical know-how

distribution and slitting network

o o Efficient and responsive

New concepts and products, sustainability through the lifecycle

CONTENTS

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UPM Annual Report 2014

UPM Annual Report 2014