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UPM Communication PapersConsistent profitable
performance
Winfried Schaur
EVP, UPM Communication Papers
31 May 2018
| © UPM – The Biofore Company
We are a relevant global player with a stronghold in Europe
2
Source: UPM, Euro-Graph, RISI, Pöyry
UPM Communication Papers
SC LWC Wood free News/UMIO
Share of
UPM Capacity
in Europe, %20.0 39.2 31.9 12.5
World’s leading producer
of graphic papers
with 8,000 employees
4
26
11
141
15 modern
and efficient mills
in Europe and
North America
Production capacity
8,2 million t/aNews 2,1/SC 1,5/LWC 2,5/WF 2,1
Global customer service and sales
| © UPM – The Biofore Company
49,4 49,1 48,6 48,7 49,1
18,7 17,616,3 15,5 14,7
4,03,8
3,7 3,5 3,6
0,60,6
0,6 0,6 0,6
2013 2014 2015 2016 2017
12,9 12,4 12,0 11,6 11,1
6,6 6,0 5,3 5,0 4,5
3,43,2
2,9 2,72,5
1,91,9
1,7 1,51,4
2013 2014 2015 2016 2017
Communication paper market demand declines steadily
3
UPM Communication Papers
Source: UPM, Euro-Graph, RISI, Pöyry, misc. public sources
12,5 12,4 12,2 11,6 11,5
9,8 9,2 8,7 8,4 7,9
5,6 5,4 5,14,7 4,6
3,4 3,23,1
3,2 3,2
2013 2014 2015 2016 2017
Europe
-3...4% p.a.
North America Rest of UPM addressable Markets*
* Markets with UPM ComPapers sales, including: South America, ME&Africa, Asia
~ ~ ~ ~ ~
Wood Free News/Umio LWC (CMR) SC [Mt]
-5…6% p.a. -2% p.a.
| © UPM – The Biofore Company
10080
… building the basis for continued profitable performance
We delivered according our strategy
4
UPM Communication Papers
Source: UPM, Euro-Graph, Pöyry
Production CapacityPaper Demand Deliveries OHS (LTA’s)
2013 2017
Fixed Costs
Efficient and modern assets
Tight grip on costs
Broad portfolio
Strong geographical footprint
Well-defended market position
10087
-13% -20%
10088
-12%
10079
-21%
100
51
-49%
UPM Communication Papers
What does it take to perform in challenging markets?
| © UPM – The Biofore Company
We expect a predictable market development in an economically stable environment
We do not anticipate disruptive changes, but accept market reality:
• Newspaper circulation is declining fast in main markets, with Germany being relatively resilient
• Magazine publishers continue to build on printed editions, decreasing circulations
are partly offset by a continuous flow of new titles in niche segments
• Direct Marketing continues to develop with variations from market to market,
e.g. increasing in Germany while dropping in the UK
• Catalogues remain a means of consumer activation, cases of pure online-retailers
and specialist stores investing in printed catalogues increase
• Fine papers continue playing an important role in private and office uses resulting
in a relatively slow decline, regulatory changes remain a risk-factor.
5
UPM Communication Papers
| © UPM – The Biofore Company
Some end-use trends support UPM performance
6
UPM Communication Papers
Source: Nielsen advertising media mix Germany, 2015–2017
0
25
50
75
100
Print 87%
Digital 13%*
Print vs. digital, % share of publishers’ revenues 2017
Print retains a relevant role in today‘s media mixRetail heavily builds on print marketing
Average 2015 & 2016
Average 2016 & 2017Advertising expenditure, M€
Share of print
0
100
200
300
400
500
600
0% 20% 40% 60% 80% 100%*2015: Digital: 10%
Source: PWC media outlook
| © UPM – The Biofore Company
Our focus: Strengthen industry leadership role
7
UPM Communication Papers
1 Uncompromising
performance
Continued focus on stringent
capacity management and
performance improvement.
Zero accidents
3 Commercial
excellence
Optimize and evolve commercial
interface and supporting processes
to ensure supply security and
customer value add.
2 Targeted
innovation
Targeted investments in innovation
to drive performance, increase
efficiencies and extend our position
in the market.
Focused on sustainabilityLeadership
| © UPM – The Biofore Company
Deep Dive: Uncompromising PerformanceStriving for maximum asset utilization
UPM Communication Papers
Developing our assets for further efficiency gains
• Conscious technology investments
with clear payback focus
• Onboarding of available new technologies and digitalization
to support flexibility and process excellence
Digitalized maintenance concepts with foreseeably
positive impact on overall performance
• Better plannability increases supply security
and technical mill performance
• Positive financial impact through reduced downtimes
and overall reduction of maintenance costs
Pilot project: UPM Hürth Mill
8
| © UPM – The Biofore Company
Deep Dive: Targeted InnovationEliminating redundant reserves by holistic end-to-end approach
9
UPM Communication Papers
Digitalized End-to-End Supply Management
Customer Demand
Inventory Management
Raw MaterialConsumption Forecast
Demand based supply
Inventory level data & Consumption forecast
Suppliers
Digitalization of supply chain is a reference case
for our focus on process automation and digitalization
• Conscious investment in end-to-end planning
and forecasting systems
• Process optimization for better integration of external partners
End-to-end supply chain with positive impact on operations
• Reduction of working capital
• Streamlined processes for more efficient operations
• Strengthened supplier relationships
through improved visibility and plannability
Recipe Data
Production Plan
| © UPM – The Biofore Company
Deep Dive: Targeted InnovationPushing product development for new end-use areas
UPM Communication Papers
We invest in extending our portfolio
to address new, profitable end-uses:
• Capturing market opportunities
• Securing asset utilization
• Extending customer base
• Supporting bottom line
Successful market launches
in past years (examples):
• Thin paper for book publishing and industrial end-uses
• CSWO paper with added economic benefits for news printers
• Book paper from Germany for Central European markets
• DigiPapers to entering growing, profitable segments
| © UPM – The Biofore Company
eOrder usage development first 9 months after start
Deep Dive: Commercial Excellence Strengthen customer experience to support market position
11
UPM Communication Papers
Overall Linear (Overall)
Increased use of eCommerce solutionsStrong global presence
Sales company
Agent
UPM Sourcing, Logistics
Paper mills
Head Office
Sales/Local contact
Strengthening our customer interface
• Conscious decision to maintain strong local footprint
• Significant investment in eCommerce solutions
• Conscious development of service offering
Securing high level supply security as a competitive factor
• Extend eCommerce solutions into production
and distribution planning
• Conscious investments in process optimization
and logistics excellence
| © UPM – The Biofore Company
UPM Communication PapersKey messages
12
UPM Communication Papers
• We are committed to paper
• Communication Papers has proven
it can deliver predictable and good results
• The market reality has been firmly embedded
in the business strategy
• Performance focus remains at the heart
of everything we do
• We innovate and develop our business
to secure our strong market position
and capture emerging opportunities globally
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