investor presentation march 2016 - upmassets.upm.com/investors/investor presentation - march...
TRANSCRIPT
Investor presentation
March 2016
UPM – THE BIOFORE COMPANY
| © UPM
UPM in transformation
2
0 %
20 %
40 %
60 %
80 %
100 %
2015
Paper ENA
Plywood
Energy
Paper Asia
Raflatac
Biorefining
Otheroperations
0 %
20 %
40 %
60 %
80 %
100 %
2003
Sold units
Paper
Plywood
Raflatac
Sawmilling
2003:
integrated
paper company
2008:
towards market-
driven businesses
2015:
six separate
businesses
Sales
EBIT (*
Net debt
Market cap
Personnel
EUR 9.8bn
EUR 429m
EUR 4.9bn
EUR 7.9bn
34,500
EUR 9.5bn
EUR 513m
EUR 4.3bn
EUR 4.7bn
25,000
EUR 10.1bn
EUR 898m
EUR 2.1bn
EUR 9.2bn
19,600
Business
portfolio,
sales
*) excluding special items. EUR 265 million forest fair value increase in 2015 excluded for comparability
0 %
20 %
40 %
60 %
80 %
100 %
2008
Sold units
Paper
Plywood
Raflatac
Sawmilling
| © UPM3
EBITDA 2015
EUR 1,350m
Capital employed, December 2015
EUR 11.0bn
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
Other operations
UPM
Energy
UPM
Biorefining
UPM
Raflatac
UPM
Paper Asia
UPM
Paper ENA
UPM Plywood
UPM businesses by EBITDA generation and
capital employed
| © UPM
1. Continuous
cost efficiency
improvement
UPM strategy in action
4
UPM
Biorefining
UPM
Paper
Asia
UPM
RaflatacUPM
Energy
UPM
Paper
ENA
UPM
Plywood
2. EBITDA target
for growth projects
EUR 200m
3. Business portfolio
development and
value creation
BIOCHEMICALS
BIOCOMPOSITES
BIOFUELS
4. New businesses
Biofuels:
Lappeenranta
biorefinery
Pulp: 10%
capacity increase
Labelling materials:
Changshu expansion
Self-adhesive labels:
expansion in growth
markets and in higher
value added products
Plywood:
Otepää expansion
| © UPM
Strengths of UPM’s model
5
Top performance
Industry-leading
balance sheet
Attractive dividend
Strong cash flowFocused
investments
| © UPM
Profit improvement programme exceeded its
targets both in fixed and variable costs
0
50
100
150
200
Q314 Q414 Q115 Q215 Q315 Q415
6
Variable cost
savings
Annualised cost reduction
impact of the programme
reached EUR 165m in Q4 15,
compared with Q3 14.
Fixed cost
savings from
closures (*
(* 800,000 tonnes of publication paper capacity in Europe:
four paper machines were closed in H1 15
EUR million
EUR 150m target
exceeded by 10%
| © UPM
Several growth projects completed – focus turns
to reaping the benefits in 2016 and beyond
7
Lappeenranta
biorefinery
120m litres of
renewable diesel
UPM Plywood
Otepää mill
expansion
to 90,000m3
Kymi
pulp mill
expansion
170,000t
UPM Raflatac
50% expansion in
APAC, growth in filmic
labelstock in Poland
UPM Paper Asia
Changshu
new speciality
paper machine
360,000t
Pietarsaari
pulp mill
expansion
70,000t
Fray Bentos
pulp mill
expansion
100,000t
Kaukas
pulp mill efficiency
improvement, paper and
pulp decoupling completed
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Capex so far EUR 660m Remaining capex EUR 110m
| © UPM
| © UPM
Portfolio development and value creation
• Performance: targeting top
performance in each business
• Grow businesses with strong
long-term fundamentals: focused
investments and synergistic M&A
• Simplify: best value realisation for
UPM
• Consolidation in European paper
market, without increasing capital
8
UPM
Biorefining
UPM
Paper
Asia
UPM
RaflatacUPM
Energy
UPM
Paper
ENA
UPM
Plywood
| © UPM| © UPM
• Biofuels: renewable diesel
suitable for all diesel engines
• Biochemicals: renewable
drop-in alternatives for oil-
based chemicals
• Biocomposites: for injection
moulding to replace oil-based
raw materials
0
50
100
150
200
250
300
350
400
Annual patent filings 2009–2014
9
New businesses based on UPM’s
development work
| © UPM
Group profitability and targets
0
2
4
6
8
10
12
10
0
2
4
6
8
10
12
0
20
40
60
80
100
0
1 000
2 000
3 000
4 000
5 000
Operating profit excl. special items
ROEexcl. special items
Net Debt
Gearing
Max gearing
Min target
EURm %%% of sales Operating profit ROE Gearing
(* (*
(* the figures include the EUR 265 million increase in the fair value of
the forests in Finland in Q3 2015.
| © UPM
Business area returns and long-term targets
11
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22
0
2
4
6
8
10
12
14
16
18
20
22ROCE %ROCE % (* ROCE %ROCE % CF/CE % ROCE %
UPM
Paper Asia
UPM
Paper ENA
UPM
Plywood
UPM
Raflatac
UPM
EnergyUPM
Biorefining
(* shareholdings in UPM Energy
valued at fair valueLong-term return target
| © UPM
Sales
EUR 2,574m +2%
EBITDA
EUR 363m +29m
Q4 2015 – growth projects started to deliver,
record-strong balance sheet
12
Operating profit (*
EUR 225m -5m
Profit before tax (*
EUR 219m +3m
Q4 2015 vs. Q4 2014:
EPS (*
EUR 0.37 +0.05 (* excluding special items.
2015 vs. 2014:
Net debt
EUR 2,100m -301m
Operating cash flow
EUR 1,185m -56m
Dividend proposal
EUR 0.75 0.05
Net debt / EBITDA
1.55x -0.28x
ROE (*
12.1% +3.8pp
| © UPM
0
50
100
150
200
250
300
350
400
450
EBITDA
Q4/14
EBITDA
Q4/15
EBITDA in Q4 2015 vs. Q4 2014
Raflatac
Paper
AsiaOther
operations
and
eliminations
Energy
Biorefining
Paper
ENA
Plywood
0
50
100
150
200
250
300
350
400
450
EBITDA
Q4/14
EBITDA
Q4/15
EURm
Prices
Variable
costs
Fixed
costs
Deliveries
Profit improvement actions and
favourable currencies outweighed
the decrease in sales prices EURm
Favourable pulp market, currencies and
costs benefited UPM Biorefining.
Increased pulp costs and currency hedges
impacted the paper businesses
13
33413.2%
36314.1%
Currency,
net
impact 33413.2%
36314.1%
| © UPM
Operating profit *) by business area
14
0
2,5
5
7,5
10
12,5
0
10
20
30
40
50
Q113
Q313
Q114
Q314
Q115
Q315
0
5
10
15
20
25
0
30
60
90
120
150
Q113
Q313
Q114
Q314
Q115
Q315
0
15
30
45
60
0
20
40
60
80
Q113
Q313
Q114
Q314
Q115
Q315
0
2
4
6
8
10
0
10
20
30
40
50
Q113
Q313
Q114
Q314
Q115
Q315
-4
-2
0
2
4
6
-50
-25
0
25
50
75
Q113
Q313
Q114
Q314
Q115
Q315
0
4
8
12
16
20
0
5
10
15
20
25
Q113
Q313
Q114
Q314
Q115
Q315
EURm % of salesUPM Paper Asia EURm % of salesUPM Paper ENA EURm % of salesUPM Plywood
EURm % of salesUPM RaflatacEURm % of salesUPM EnergyEURm % of salesUPM Biorefining
*) excluding special items
| © UPM
Outlook for 2016
• UPM’s profitability improved in 2015 and the improvement is expected to continue in 2016. The business performance in 2016 is underpinned by the company’s growth projects and continuous cost efficiency measures.
• UPM’s growth projects are expected to contribute positively to the company’s earnings in 2016, compared with 2015. UPM continues its measures to reduce variable and fixed costs also in 2016. Currencies are expected to contribute positively as hedges roll over, assuming relevant currencies stay at about the same level as at the end of 2015.
| © UPM15
| © UPM
Strong cash flow
16
0
200
400
600
800
1 000
1 200
1 400
Q10
8
Q30
8
Q10
9
Q30
9
Q11
0
Q31
0
Q11
1
Q31
1
Q11
2
Q31
2
Q11
3
Q31
3
Q11
4
Q31
4
Q11
5
Q31
5
Operating cash flow
Cash flow
after investing
activities
EUR million Cash flow, trailing 12 months
• Q4 2015 operating cash
flow was EUR 390m
(462m)
• In Q4 2015, working capital
decreased by EUR 60m
(EUR 144m)
• In 2015, operating cash flow
was EUR 1,185m (1,241m),
EUR 2.22 per share (2.33)
| © UPM
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
0,90
2008 2009 2010 2011 2012 2013 2014 2015
Dividend proposal
EUR per
share
0.400.45
0.55
17
Dividend policy
• UPM aims to pay an attractive
dividend, 30-40% of operating
cash flow per share
Board’s dividend proposal
for 2015
• EUR 0.75 (0.70) per share
• 34% of 2015 operating cash
flow per share
0.60 0.60 0.60
Dividend
0.700.75
| © UPM
Low investment needs in existing assets allow
growth projects with modest total capex
18
0
200
400
600
800
1 000
1 200
2008 2009 2010 2011 2012 2013 2014 2015 2016e
EUR million
Operational investments
329
Capital expenditure
Strategic investments
Depreciation
Uruguay
acquisition
Myllykoski
acquisition
486
Estimate
375 350
| © UPM
Balance sheet continued to strengthen
19
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
2015
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
Net debt, EUR millionNet debt / EBITDA(trailing 12 months)
Net debt
Net debt / EBITDA
1.6
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2008
2009
2010
2011
2012
2013
2014
2015
20
30
40
50
60
70
80
90
Net debt, EUR million Gearing %
Net debt
Gearing
26
Liquidity was EUR 1.7bn at the end of Q4 2015
Repayments total EUR 0.24bn in 2016
| © UPM
UPM Biorefining
UPM Biorefining
20
UPM Biorefining consists of pulp,
biofuels, sawn timber and
integrated energy production
UPM Biorefining 2015 (EURm)
2014 (EURm)
Sales 2,272 1,937
Operating profit *) 467 217
% of sales 20.6 11.2
ROCE *), % 14.6 7.6
*) excluding special items
| © UPM
UPM Biorefining
21
UPM Biorefining value created
Capitals
Capital intensive process industry
Engaged high performing people
Sustainable forest biomass from certified sources and with full traceability
Sustainable forest management
Responsible sourcing
Intellectualproperty rights
Community engagement
Forestry and wood sourcing
• Professional sourcing organisation
• UPM’s certified forests in Finland
• UPM certified eucalyptus plantationsin Uruguay
• Forestry services
Production Sales
Pulp• Large
modern mills• Efficient
production• Combined heat
and power production
Biofuels• World’s first
biorefineryproducing wood-based renewable diesel
• Proprietary technology
• IPR
Timber• Efficient sawmills
Pulp
• Global sales
• Strategic
sales
co-operation
• World-class
technical
service
Biofuels
• Regional
biofuels sales
Timber
• Skilled global
sales networkSyn
erg
ies i
n w
oo
d s
ou
rcin
g a
nd
ra
w m
ate
ria
ls
Syn
erg
isti
c o
pe
rati
on
s in
pro
du
cti
on
in
teg
rati
on
Customers
Pulp• Tissue,• Packaging
board,• Speciality
paper and • Graphic paper
producers
Biofuels
• Fuel distributors
Timber
• Construction, furniture, joinery industries
Outcomes
Safe and sustainableproducts
Renewable energy
Carbon storing products
Low emissions
Biodiversity
Employment
Work safety
Community wellbeing
ROCE
End uses
| © UPM
Kymicapacity 700,000 tsoft- and hardwood pulp
Pietarsaaricapacity 800,000 tsoft- and hardwood pulp
Kaukascapacity 740,000 tsoft- and hardwood pulp
Fray Bentoscapacity 1,300,000 tof eucalyptus
UPM Biorefining
UPM plans to expand production in its
competitive pulp mills by 10%
22 | © UPM
| © UPM
UPM Biorefining
85% of pulp demand is in growing end-use
segments
Bleached market pulp demand by end-use and region
*Source: Hawkins Wright, August 2015
WE NA China ROW Total
P&W 11% 3% 11% 8% 33%
Tissue 9% 7% 8% 11% 35%
Packaging 1% 0% 4% 1% 8%
Speciality 6% 1% 4% 4% 15%
Fluff 2% 2% 2% 4% 10%
29% 14% 29% 28% 100%
= declining market segment (14%)
= growing market segment (86%)
23
| © UPM
UPM Biorefining
Chemical pulp market
24
Source: PPPC World-20 statistics
Pulp inventories
Days of
supply
300
400
500
600
700
800
900
1 000
1 100
2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/tonne
Q4 NBSK pulp price decreased 3% from Q3
Q4 BHKP pulp price unchanged from Q3
BHKP
NBSK
Source: FOEX Indexes Ltd.
15
20
25
30
35
40
45
50
55
60
65
2008 2009 2010 2011 2012 2013 2014 2015
Hardwood
inventories
Softwood
inventories
| © UPM
UPM Biorefining
Renewable drop-in diesel suitable for all diesel engines
• Engine tests done in independent research centres
- Finnish VTT
- German research centre FEV
• Fleet tests done with VW and VTT
• Renewable drop-in diesel suitable for all diesel engines
• Functions like any regular diesel
25
RENEWABLE RAW MATERIAL
100 %
CO2 EMISSIONS(VS. FOSSIL FUEL)
–80 %
HYDROCARBON FUEL, COMPATIBLE WITH DIESEL STANDARD EN590
100 %
| © UPM
UPM Biorefining
Growing share of advanced biodiesel
• Demand for advanced biofuels is growing due to stricter environmental standards and sustainability requirements
• The EU is aiming to increase the use of renewable fuels in transport:
- EU 2020: 10% target in place (Finland 20%)
• ILUC-directive by the EU to govern sustainable raw materials approved for double counted biofuels
• Cap of 6-7% for traditional biodiesels favours use of advanced biofuels, e.g. UPM BioVerno
26
| © UPM
UPM Biorefining
UPM Biofuels – drivers for profitable business
PriceUPM BioVerno – RMEcompared with reference (RME)
• Higher energy content
• Lower GHG emissions, no indirect land use change
• No blending limit from quality
• Lower tailpipe emissions
• Fits to existing infrastructure and distribution network
• Double counting and future 2G quota
Low feedstock costCTO – rapeseed oilcompared with reference (rapeseed oil)
• Price
• Yield
• Flexible regarding feedstock
Competitive other costsUPM technology• Integration benefits in energy,
raw materials and infrastructure
• Stability compared with RME
27
| © UPM
UPM Energy
UPM Energy
A versatile set-up of cost competitive low-emission power generation plants in Finland
Trading in physical and derivative markets
28
*) excluding special items
UPM Energy 2015 (EURm)
2014 (EURm)
Sales 415 464
Operating profit *) 181 202
% of sales 43.6% 43.5%
ROCE *), % 6.7% 7.0%
| © UPM
Versatile generation
Hydro power
• Flexible
• Cost competitive
• Low emissions
• Renewable
• Physical value creation
• Mainly Nord Pool Spot market for day-ahead and intraday trading
• Members (buyers and sellers) agree on contracts for the delivery of power
(from own hydropower plants and shareholdings in energy companies)
Nuclear
• Efficient base load
• Cost competitive
• Low emissions
Condensing power
• Reliable peak load
UPM Energy
UPM Energy value created
Capitals
Capital intensive utility business
Low-emission energy sources, including water rights
Fuels
Engaged high performing people
Organisational experience
Energy trading platform
Regulation
Physical power market
Financial MarketsDerivative power contracts traded on Nasdaq Commodities
• Value protection and creation
Outcomes
Low-emission electricity
Work safety
Energy supply security
Flexible power supply
Risk mitigation
ROCE
Householdconsumption
Trans-mission
Distri-bution
Industrial electricityconsumption
Small and medium sized enterprises
29
| © UPM
UPM Energy
Cost competitive low-emission electricity generation
30 Source: PWC 2013, UPM
kgCO2/MWh
0
200
400
600
800
1000
1200
1400
DE
ID
rax
RW
ES
co
ttis
h &
So
uth
ern
ED
PE
.ON
Va
tte
nfa
llE
nel
Ed
ipow
er
Unio
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en
osa
CE
ZE
nB
WG
DF
Su
ez E
uro
pe
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ng
: E
lsa
m+
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erg
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erd
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+S
co
ttis
h P
ow
er
UP
MF
ort
um
ED
FV
erb
un
dS
tats
kra
ft
Type Nominal capacity
MW
Hydropower 708
Nuclear power 581
Condensing power 320
Wind power 1
Total in UPM Energy 1,610
Electricity generation capacity in 2014 Specific CO2 emissions
| © UPM
UPM Energy
Price development in the Nordic and Helsinki power markets
31
Source: Reuters
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EUR/MWh
Coal SRMC Front Year Helsinki Front Year System Front Year
Finnish and Nordic electricity prices
| © UPM
UPM Raflatac
UPM Raflatac
UPM Raflatac2015
(EURm)
2014 (EURm)
Sales 1,409 1,248
Operating profit *) 102 80
% of sales 7.2% 6.4%
ROCE % 17.6% 15.1%
*) excluding special items
Self-adhesive label materials for product
and information labelling in industries such
as food, beverage, retail and logistics
32
| © UPM
UPM Raflatac
33
UPM Raflatac value created
Capitals CustomersSelf-adhesive
labelstock
factories
Distribution
and slitting
network
Sales and
services
Capital light converting business
Engaged high performing people
Responsible sourcing
Face paper
Release paper
Films
Adhesives
Silicones
• Modern
• Efficient
• Strategically located
• Optimised distribution and slitting network
• Efficient and responsive
• Loyal relationships
• Global scale
• Technical know-how
Labelprinters
Label using industries
Home & Personal care
Food & Beverage
Retail
A4 and cut-size
Pharmaceutical
Transport & Logistics
Durables
Tyres
Outcomes
Safe and certified products
Brand appeal
Work safety
Employment
Recyclable products
RafCycle-waste recycling concept
ROCE
End uses
New concepts and products, sustainability throught the lifecycle
| © UPM
UPM Raflatac
Growth in self-adhesive labelling market
continues ~ EUR 6bn market
34
5,1 bm2
+2-3%
North America
Europe
5,7 bm2
+2-3%
South America
1,1 bm2
+4-6%
Middle East & Africa
0,6 bm2
+10%
Emerging Asia
2,0 bm2
+8-10%
Japan &
Korea
1,6 bm2
+1%
Oceania
0,3
+1%
Global self-adhesive label market size and long-term growth outlook
Source: FINAT, TLMI, UPM Raflatac,
Bain, AWA, Freedonia
Global growth in 2014 estimated ~4%
| © UPM
UPM Raflatac
Next steps
Capture organic market growth
Leverage existing asset base to improve
productivity
Continue low-capex expansion in
emerging markets and film and special
product lines
Speed-up the above by synergistic
acquisitions
35
1
2
3
4
| © UPM
UPM Paper Asia
UPM Paper Asia
36
UPM Paper Asia serves growing fine and
office papers market in Asia, and labelling
materials markets globally
Recognized industry leader in
sustainability
Extensive own sales network
UPM Paper Asia 2015(EURm)
2014(EURm)
Sales 1,168 1,124
Operating profit *) 55 108
% of sales 4.7% 9.6%
ROCE, % 5.4% 12.5%
*) excluding special items
| © UPM
UPM Paper Asia
37
UPM Paper Asia value created
Capitals
Capital intensive process industry
Engaged high performing people
Community engagement
Responsible sourcing
Sustainable chemical pulp with full traceability
Sustainable raw materials and energy
Production
Labelling materials
• Extensive experience
in high quality release
liners and face papers
• Cost competitive
production
Fine papers
• Leading office paper
brands in China
• Selectively in uncoated
and coated segments
• Cost competitive
production
• BAT (Best Available
Techniques)
Sales
• Global market leader in labelling materials
• Own sales network of fine papers in Asia Pacific
• Reliable supplier
• Exceptional customer experience
• Recognised leader in sustainability
Customer-driven R&D
Customers End uses Outcomes
Labelstockmanufacturers
Siliconisers
Packaging converters
Merchants
Printers & Publishers
Merchant-owned labels
Safe and certified products
Work safety
Employment
Career opportunity
Ethical and compliance in global norms
Recyclable products
Low emissions
ROCE
| © UPM
UPM Paper Asia
Global market leader in labelling materials
+4,2% p.a.Globally
+2,5% p.a.
North America
Europe+1,7% p.a.
+6,6% p.a.
Latin AmericaAsia Pacific
+8.0% p.a.
Others+7,6% p.a.
2013 20202013 2020
2013 2020
2013 20202013 2020 2013 2020
*Glassine/SCK are papers used in labelling materials as release liners
TervasaariJämsänkoski
38
Source: AWA
Changshu
Labelling: glassine/SCK(* demand outlook by 2020
| © UPM
UPM Paper Asia
Market leader in high quality office papers in
China with extensive, own sales network
39 Source: RISI, Poyry, UPM
China
2013 2020
APAC
+2.0% p.a.+2.6% p.a.
Changshu
2013 2020
Fine and office paper demand in Asia by 2020
| © UPM
UPM Paper ENA 2015(EURm)
2014(EURm)
Sales 5,056 5,284
Operating profit *) 24 181
% of sales 0.5 3.4
ROCE, % 1.0 7.2
Cash flow/CE, % 4,6 12,9
UPM Paper ENA
UPM Paper Europe and North America
Paper products for magazine and
newspaper publishers, advertising end
uses as well as home and office
40 | © UPM*) excluding special items
| © UPM
UPM Paper ENA
41
UPM Paper ENA value created
Capitals
Capital intensive process industry
Engaged high performing people
Community involvement and local presence
Responsible sourcing
Virgin fibre from certified sources
Recycled fibre
Chemical pulp with full traceability
Sustainable raw materials and energy
Customer-based business units
Production
• Customer focus and offerings
• Wide product range
• Reliable supplier
• Common operational platform for production,
supply chain and sales
Magazine Publishing & Advertising
Newspaper Publishing
Merchants, Home & Office
• Efficient and cost
competitive production
• Environmental and
technical expertise
• Focused R&D
Sales
• Market-based, global
sales
• World class technical
service
• Excellent customer
service
Customer End uses Outcomes
Publishers
Printers
Retailers
Cataloguers
Advertisers
Brand owners
Merchants
Converters
Safe and certified products
Work safety
Employment
Recyclable products
Renewable energy
Low emissions
Vitality of local communities
Responsible restructuring
Cash flow / Capital employed
| © UPM
UPM 21 %
Stora Enso15 %
Sappi 8 %
Norske Skog 5 %Burgo
5 %
Mondi 4 %
Portucel4 %
Holmen 3 %
IP 3 %
Lecta 3 %
Palm 3 %
SCA 2 %
Industry structure
UPM Paper ENA
European graphic paper market is oversupplied,
industry structure is fragmented
42
Sources: Euro-Graph, PPPC
0
10
20
30
40
50
60
2008 2009 2010 2011 2012 2013 2014p 2015e
Million tonnes
Demand Net Exports Capacity
Demand and Capacity
Sources: JP Webbmill
81 small producers
| © UPM
-20
-15
-10
-5
0
5
10
15
20
-6,0
-3,0
0,0
3,0
6,0
Paper demand growth (% trailing 3 month)
Sources: Cepiprint, Cepifine, OECD
Euro zone composite leading indicator* (Y/Y %)
Graphic paperdemand growth
UPM Paper ENA
Growth in the European economy remains low
Euro zone composite leading indicator
43
| © UPM
UPM Paper ENA
Overcapacity in European graphic paper
is visible in margins
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
44
Cash cost of a marginal producer
Price
EUR/t
Sources: PPI, RISI, Pöyry
| © UPM
1 500
2 000
2 500
3 000
3 500
4 000
Q1
10
Q4
10
Q3
11
Q2
12
Q1
13
Q4
13
Q3
14
Q2
15
45
1 500
2 000
2 500
3 000
3 500
4 000
Q1 1
0Q
3 1
0Q
1 1
1Q
3 1
1Q
1 1
23Q
12
Q1 1
3Q
3 1
3Q
1 1
4Q
3 1
4Q
1 1
5Q
3 1
5
Sources: Cepiprint/fine, PPPC
Fine papers demand
in Europe -2% 2015
1%
UPM Paper ENA
Graphic papers demand in Europe decreased
by 2% in Q4 and 4% in 2015 from previous year
'000 tonnes
1 500
2 000
2 500
3 000
3 500
4 000
Q1 1
0
Q4 1
0
Q3 1
1
Q1 1
3
Q4 1
3
Q3 1
4
Q2 1
5
Newsprint demand
in Europe -6% 2015Magazine papers demand
in Europe -5% 2015
-4% -4%
| © UPM4646
400
500
600
700
800
900
1000
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
News SC LWC
WFC WFU
EUR/t
Europe
400
500
600
700
800
900
1000
1100
1200
1300
Jan-
08Ja
n-09
Jan-
10Ja
n-11
Jan-
12Ja
n-13
Jan-
14Ja
n-15
News SC LWC
WFC WFU
USD/t USD/t
ChinaNorth America
Sources: PPI, RISI
UPM Paper ENA
Graphic paper prices
400
500
600
700
800
900
1000
1100
1200
1300
WFC r (100% chemical pulp)
Reels (mixedchemical/mechanical pulp)
Uncoated Woodfree Reels (100%chemical pulp)
| © UPM
UPM Plywood
UPM Plywood
Plywood and veneer products for building
and construction, and industrial applications
such as transportation equipment
UPM Plywood 2015(EURm)
2014(EURm)
Sales 439 440
Operating profit *) 55 44
% of sales 12.5 10.0
ROCE, % 20.9% 16.4%
47
*) excluding special items
| © UPM
UPM Plywood
48
UPM Plywood value created
Capitals
Moderately labour and capital intensive industry
Engaged high performing people
Community engagement
Responsible sourcing
Sustainably sourced wood from certified sources with full traceability
Sustainable energy
Production
Plywood mills(spruce)
Plywood mills(birch)
Veneer mill
Sales
• Leading supplier in
demanding end uses
• High quality
• Supply chain
services
• Professional
technical services
• Reliable supplier
• Strong brand
Customers
industries
End uses Outcomes
Construction
LNG shipbuilding
Vehicle flooring
Parquet
Other industrial manufacturing
Safe and certified products
Carbon storing products
Employment
Work safety
Vitality of local communities
Low emissions
ROCE
Product and process development
| © UPM
UPM Plywood
Focus on the most attractive businesses
49
• Repair & renovation expected to stay solid or increase
• Residential building and civil engineering showing signs of recovery
Construction /
Panel Trading
• High share of road transportation to grow further in Europe
• Fleet replacement backlog
Vehicle Flooring
• Half of world’s gas reserves can reach the market only as LNG
• Trade is growing, routes are getting longer
LNG Shipbuilding
• UPM #1-2 in Europe • UPM #1 in Europe • UPM #1 globally
| © UPM50
It should be noted that certain statements herein which are not historical facts, including, without
limitation those regarding expectations for market growth and developments; expectations for
growth and profitability; and statements preceded by "believes", "expects", "anticipates",
"foresees", or similar expressions, are forward-looking statements. Since these statements are
based on current plans, estimates and projections, they involve risks and uncertainties which may
cause actual results to materially differ from those expressed in such forward-looking statements.
Such factors include, but are not limited to: (1) operating factors such as continued success of
manufacturing activities and the achievement of efficiencies therein, including availability and cost
of production inputs, continued success of product development, acceptance of new products or
services by the Group's targeted customers, success of the existing and future collaboration
arrangements, changes in business strategy or development plans or targets, changes in the
degree of protection created by the Group's patents and other intellectual property rights, the
availability of capital on acceptable terms; (2) industry conditions, such as strength of product
demand, intensity of competition, prevailing and future global market prices for the Group's
products and the pricing pressures thereto, financial condition of the customers and the
competitors of the Group, the potential introduction of competing products and technologies by
competitors; and (3) general economic conditions, such as rates of economic growth in the
Group's principal geographic markets or fluctuations in exchange and interest rates.
Forward-looking statement
| © UPM51
Contact information
• www.upm.com → Investors
• Mika Mikkola– +358 204 15 0376
• Johan Lindh– +358 204 15 0097
• Annele Inberg, specialist– +358 204 15 0033