UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Parent company accounts (Finnish Accounting Standards, FAS)

Operating lease commitments, where a Group company is the lessee

In December 2008 the Supplier initiated the International Cham- ber of Commerce (ICC) arbitration proceedings and submitted a claim concerning the delay at the OL3 project and related costs. According to TVO, the Supplier’s monetary claim, as updated in July 2015, is in total approximately EUR 3.4 billion. The claim covers events occurred during the construction period until the end of June 2011. The sum includes penalty interest (until 31 July 2015) and payments allegedly delayed by TVO under the plant contract together amounting to approximately EUR 1.4 billion as well as approximately EUR 140 mil- lion in alleged lost of profit. Having considered and found the earlier claims by the Supplier to be without merit, TVO will scrutinize the updated claim and respond to it in due course. According to TVO, the quantification estimate of its costs and losses related to its claim in the arbitration proceedings is approximately EUR 2.6 billion until the end of 2018, which is the estimated start of the regular electricity produc- tion of OL3 according to the schedule submitted by the Supplier in September 2014. TVO´s current estimate was submitted to the tribunal in the arbitration proceedings in July 2015. The Supplier consortium companies (AREVA GmbH, AREVA NP SAS and Siemens AG) are jointly and severally liable for the plant contract obligations. The arbi- tration proceedings may continue for several years, and the claimed amounts may change. No receivables or provisions have been recorded by TVO on the basis of claims presented in the arbitration proceedings. Commitments In the normal course of business, UPM enters into various agreements providing financial or performance assurance to third parties. The maximum amounts of future payments for which UPM is liable is dis- closed in the table below under “Other commitments”.

The Group leases office, manufacturing and warehouse space through various non-cancellable operating leases. Certain contracts contain renewal options for various periods of time.

The future aggregate minimum lease payments under non-cancellable operating lease contracts

Income statement

Cash flow statement

Year ended 31 Dec.

Year ended 31 Dec.

As at 31 December

2015 2014

2015 2014

EURm Sales

Note

EURm

Note

2015

2014

EURm

Operating activities Profit before extraordinary items Financial income and expenses Adjustments to operating profit

1 3,298 3,395

No later than 1 year

65 50 45 36 34

60 47 39 35 31

652 618 –63 –405

Change in inventories of finished goods and work in progress

1–2 years 2–3 years 3–4 years 4–5 years

2 –33

1 –39 384

Production for own use Other operating income Materials and services

4

5

Change in working capital

2 108

99

2

169 186

Interest paid

–60 –75 182 560

Later than 5 years

190 420

187 399

Dividends received Interest received Other financial items Income taxes paid

Materials and consumables Purchases during the financial period

Total

12

23 25

–1,992 –2,079

–25

Change in inventories

–26

–7

Capital commitments at the balance sheet date but not recognised in the financial statements; major commitments under construction listed below

3 –90 –63

External services

–38 –36 –2,056 –2,122

Net cash generated from operating activities

677 1,166

Personnel expenses

3

Commitment as at 31 December 2015 2014

Investing activities Investments in tangible and intangible assets Proceeds from sale of tangible and intangible assets

Wages and salaries

–363 –361

Total cost

Social security expenses Pension expenses

–180 –181

EURm

–64 –59 –18 –22 –445 –442

52 42

Debottlenedking / Kaukas pulp mill

49 30

– –

135 100 –69 –29

Other social security expenses

Mill expansion / Otepää

Investments in shares and holdings

Proceeds from sale of shares and holdings

818 –71

59 –9 39

Depreciation and value adjustments Depreciation according to plan Value adjustments to goods held as non-current assets

4

Increase in other investments Decrease in other investments

–220 –227

40 Events after the balance sheet date The Group’s management is not aware of any significant events occur- ring after 31 December 2015.

15

Net cash used in investing activities

648 –21

– –50 –220 –277

Commitments

As at 31 December

Financing activities Decrease in non-current liabilities

Other operating costs and expenses

3 –163 –499

2015

2014

EURm

–386 –766 –614 –223

Operating profit

589 213

Increase or decrease in current liabilities

On own behalf Mortgages and pledges

Share options exercised

–

47

Financial income and expenses Income from investments held as non-current assets Dividends from Group companies Other interest and financial income Other interest income from Group companies Other interest income from other companies Interest income from Group companies

220

289

Dividends paid

–373 –319

Group contributions received and paid Net cash used in financing activities

61

4

On behalf of others Guarantees

–1,312 –1,257

182 559

4

5

6

8

Cash and cash equivalents Cash and cash equivalents at beginning of year Change in cash and cash equivalents Cash and cash equivalents at end of year

Other commitments, own Operating leases, due within 12 months Operating leases, due after 12 months

3 –

3

464 576 13 –112 477 464

65

60

11

355 180 824

339 160 853

Other commitments

Other financial income from Group companies

29

8 1

Total

Other financial income from other companies

– –

Notes to the cash flow statement

Value adjustments on investments

–10

Mortgages and pledges

220

289

Interest and other financial expenses Interest expenses to Group companies Interest expenses to other companies

Guarantees

4

5

–34 –37 –26 –37 –97 –101 63 405 652 618

1 Adjustments to operating profit Depreciation

Operating leases Other commitments

420 180 824

399 160 853

220 227 –251 102

Other financial expenses to other companies

Gains and losses on sale of non-current assets Value adjustments on non-current assets

Total

Total financial income and expenses Profit before extraordinary items

–

50

Change in provisions

–8

5

Property under mortgages given as collateral for own commitments include property, plant and equipment, industrial estates and forest land. In addition, UPM has committed to participate in the share issue from Pohjolan Voima Oy to finance the Olkiluoto 3 nuclear power plant project. UPM’s total commitment of the share issue is EUR 119 million, of which EUR 31 million was paid in 2015, EUR 31 million in 2014 and EUR 31 million in 2013. The remaining part of the share issue will be implemented during the coming years based on the financing needs of the project.

Total

–39 384

Extraordinary items

5

Extraordinary income Extraordinary expenses Total extraordinary items

4

70 –9 61

2 Change in working capital Inventories

–6 –2

30 27

37 77

Current receivables

Profit before appropriations and taxes

650 679

Current non-interest-bearing liabilities

51 –15

Total

108

99

Appropriations Increase or decrease in accumulated depreciation difference

–44 117 –61 –86 545 710

3 Taxes from sales of non-current assets are reported here on a net basis.

Income taxes

6

Profit for the financial period

contents

accounts

129

130

UPM Annual Report 2015

UPM Annual Report 2015