UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

UPM Biorefining

OUR DIRECTION • In Pulp, maintain cost competitiveness through continuous operational improve- ment, provide the most versatile pulp product range aligned with top-notch environmental standards and most advanced technical service. Grow as a cost efficient producer through debottle- necking investments and potentially through acquisitions. • In Biofuels, commercialise the investment in the world’s first biorefinery producing wood-based renewable diesel. • In Timber, enhance profitability through efficient use of wood supply, integrated full-production and sharpened commercial strategy. OUR STRENGTHs • Versatile range of pulp grades suitable for a wide range of end uses • Own sales and service network for the global customer base • Modern, efficient pulp mills and business committed to growth • World-class logistics platform connecting continents • Sustainable wood sourcing and excellent 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

KEY FIGURES

2014 1,937

2015 2,272

Sales, EURm

217

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

467

2,862

3,191

7.6

ROCE excl. special items, %

14.6

2,529

Personnel on 31 Dec.

2,593

Benefits from integrated production In the UPMBiorefining business area, UPM combines integrated production of pulp, renewable diesel and sawn timber with a joint supply chain of wood rawmaterials. Energy, crude tall oil and turpentine are recovered in the pulp production process. Pulp mills produce renewable energy in their recovery boilers and provide fossil CO 2 -neutral biomass-based electricity. Crude tall oil is the rawmaterial in UPM’s Lappeenranta Biorefinery producing wood-based renewable UPMBioVerno diesel. Significant improvement in profitability

Sawmills have a central role in the wood supply chain, as their by-products are used in the production of pulp and energy. In UPMBiorefining, UPM benefits from efficient use of wood rawmaterials and integrated production. Business performance In pulp operation, profitability increased mainly because of higher average pulp sales prices. Variable costs decreased, partly because of improved cost efficiency. Biofuels production ramp-up was slow in the first half of the year and improved after the maintenance shutdown in the third quarter. Profitability reached break- even by year-end. Profitability in sawmill operations decreased due to stiffer price competition, more than offsetting the positive impacts of increased delivery volumes and improved production efficiency. UPMBiorefining’s return on capital employed increased, exceeding the long-term target.

Operating profit *) EUR million

500

400

300

200

100

0

2013

2014

2015

*) excl. special items

UPM Biorefining value created

CAPITALS

OUTCOMES

FORESTRY AND WOOD SOURCiNg o o Professional sourcing organisation o o UPM’s certified o o UPM’s certified eucalyptus plantations in Uruguay o o Forestry services forests in Finland

PRODUCTION PULP

SALES PULP o o Multi-fibre pulp product offering o o World-class technical service o o Global sales

CUSTOMERS PULP o o Tissue, o o Packaging board, o o Specialty paper and o o Graphic paper producers

END USES

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

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

o o Large modern mills o o Efficient production o o Combined heat and power production BIOFUELS o o Advanced renewable diesel o o World’s first biorefinery producing wood-based renewable diesel o o IPR TIMBER o o Efficient sawmills

BIOFUELS o o Fuel distributors

BIOFUELS o o Regional sales

TIMBER o o Construction, furniture, joinery industries

TIMBER o o Skilled global sales network

Community engagement

Synergies in wood sourcing and raw materials

Synergistic operations in production integration

contents

19

20

UPM Annual Report 2015

UPM Annual Report 2015

Made with