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UPM Annual Report 2014
UPM Annual Report 2014
101
102
CONTENTS
ACCOUNTS
12 Finance costs
Year ended 31 December
EURm
2014 2013
Exchange rate and fair value gains and losses
Derivatives held for trading
96 –190
Fair value gains on derivatives designated
as fair value hedges
51 –124
Fair value adjustment of interest-bearing liabilities
attributable to interest rate risk
–50
126
Fair value adjustment of firm commitments attributable
to foreign exchange risk
5
–
Foreign exchange gains/losses on financial liabilities
measured at amortised cost
–123 105
Foreign exchange gains/losses on loans and
receivables
17
93
–4
10
Interest and other finance costs, net
Interest expense on financial liabilities measured
at amortised cost
–148 –146
Interest income on derivative financial instruments
90
85
Interest income on loans and receivables
15
5
Other financial expenses
–19
–28
–62 –84
Total
–66
–74
Net gains and losses on derivative financial
instruments included in the operating profit
Year ended 31 December
EURm
2014 2013
Derivatives designated as cash flow hedges
30
75
Derivatives held for trading
–53
32
Total
–23
107
The aggregate foreign exchange gains and losses
included in the consolidated income statement
Year ended 31 December
EURm
2014 2013
Sales
11
56
Other operating income
23 –36
Net financial items
–11
4
Total
23
24
13 Income taxes
Year ended 31 December
EURm
2014 2013
Major components of tax expenses
Current tax expense
100
123
Change in deferred taxes (Note 28)
55
17
Income taxes, total
155
140
Income tax reconciliation statement
Profit (loss) before tax
667
475
Computed tax at Finnish statutory rate of 20% (24.5%)
133
116
Difference between Finnish and foreign rates
9
–6
Non-deductible expenses and tax-exempt income
–27
–42
Tax loss with no tax benefit
25
32
Results of associated companies
–1
–
Change in tax legislation
1
–80
Change in recoverability of deferred tax assets
19
129
Utilisation of previously unrecognised tax losses
–5
–
Other
1
–9
Income taxes, total
155
140
Effective tax rate
23.2% 29.5%
Profit before taxes for 2014 and 2013 include income not subject to tax
from subsidiary operating in tax free zone.
In 2014, change in recoverability of deferred tax assets relates to
reassessment of estimated recoverability of deferred tax assets in France.
In 2013, change in tax legislation includes a tax income of EUR 76
million from tax rate change in Finland and a tax income of EUR 5 mil-
lion from tax rate change in UK. Change in recoverability of deferred
tax assets relates to reassessment of estimated recoverability of EUR 120
million related to deferred tax assets in Canada.
Tax effects of components of other comprehensive income
Year ended 31 December
EURm
2014
2013
Before
tax Tax
After
tax
Before
tax Tax
After
tax
Actuarial gains and losses on
defined benefit obligations
–235 54 –181 103 –34 69
Translation differences
291 – 291 –219 – –219
Net investment hedge
–51 10 –41 102 –25 77
Cash flow hedges
–133 26 –107 –36 8 –28
Available-for-sale investments
–173 9 –164 43 15 58
Other comprehensive income –301 99 –202 –7 –36 –43
14 Earnings per share
Year ended 31 December
2014 2013
Profit (loss) attributable to owners of
the parent company, EURm
512
335
Weighted average number of shares (1,000)
531,574 527,818
Basic earnings per share, EUR
0.96 0.63
For the diluted earnings per share the number of shares is adjusted by
the effect of the share options.
Profit (loss) attributable to owners of
the parent company, EURm
512
335
Profit (loss) used to determine diluted earnings
per share, EURm
512
335
Weighted average number of shares (1,000)
531,574 527,818
Weighted average number of shares for
diluted earnings per share (1,000)
531,574 527,818
Diluted earnings per share, EUR
0.96 0.63
15 Dividend per share
The dividends paid in 2014 were EUR 319 million (EUR 0.60 per share)
and in 2013 EUR 317 million (EUR 0.60 per share). The Board of
Directors proposes to the Annual General Meeting that a dividend of
EUR 373 million, EUR 0.70 per share, will be paid in respect of 2014.
16 Goodwill
As at 31 December
EURm
2014
2013
Carrying value at 1 Jan.
219
222
Translation differences
11
–3
Carrying value at 31 Dec.
230
219
Goodwill by reporting segment
As at 31 December
EURm
2014
2013
UPM Biorefining
209
198
UPM Raflatac
7
7
UPM Plywood
13
13
Other operations
1
1
Total
230
219
Impairment tests
The Group prepares impairment test calculations at operating segment
or at lower business unit level annually. The key assumptions for calcula-
tions are those regarding business growth outlook, product prices, cost
development, and discount rate.
The business growth outlook is based on general forecasts for the
business in question. Ten-year forecasts are used in these calculations as
the nature of the Group’s business is long-term, due to its capital inten-
sity, and is exposed to cyclical changes. In estimates of product prices
and cost development, forecasts prepared by management for the next
three years and estimates made for the following seven years are taken
into consideration. The Group’s recent profitability trend is taken into
account in the forecasts. In addition, when preparing estimates, consider-
ation is given to the investment decisions made by the Group as well as
the profitability programmes that the Group has implemented and the
views of knowledgeable industry experts on the long-term development
of demand and prices.
In annual impairment tests, the recoverable amount of groups of
cash generating units is determined based on value in use calculations.
The discount rate is estimated using the weighted average cost of
capital on the calculation date adjusted for risks specific to the business
in question. The pre-tax discount rate used in 2014 for pulp operations
Finland was 9.86% (10.06%), and for pulp operations Uruguay 9.62%
(8.48%). The recoverable amount is most sensitive to pulp sales prices
and the cost of wood raw material. As at 31 December 2014, for pulp
operations Finland, a decrease of more than 13.4% in pulp prices would
result in recognition of impairment loss against goodwill. The Group
believes that no reasonable change in wood cost would cause the aggre-
gate carrying amount to exceed the recoverable amount. For pulp opera-
tions Uruguay, a decrease of more than 3.9% in pulp prices or an
increase of more than 10% in wood cost would result in recognition of
impairment loss against goodwill. A decrease of more than 5.6% in pulp
prices or an increase of more than 15% in wood cost would result in a
write-down of the entire goodwill.
17 Other intangible assets
As at 31 December
EURm
2014
2013
Intangible rights
Acquisition cost at 1 Jan.
536
536
Additions
3
3
Disposals
–2
–1
Reclassifications
–
2
Translation differences
12
–4
Acquisition cost at 31 Dec.
549
536
Accumulated amortisation and impairment at 1 Jan.
–300
–294
Amortisation
–16
–17
Disposals
2
2
Reclassifications
–
8
Translation differences
–9
1
Accumulated amortisation and impairment at 31 Dec.
–323
–300
Carrying value at 1 Jan.
236
242
Carrying value at 31 Dec.
226
236
As at 31 December
EURm
2014
2013
Other intangible assets
1)
Acquisition cost at 1 Jan.
673
669
Additions
6
13
Disposals
–10
–15
Reclassifications
11
8
Translation differences
5
–2
Acquisition cost at 31 Dec.
685
673
Accumulated amortisation and impairment at 1 Jan.
–591
–582
Amortisation
–30
–28
Disposals
10
15
Reclassifications
–
2
Translation differences
–5
2
Accumulated amortisation and impairment at 31 Dec.
–616
–591
Carrying value at 1 Jan.
82
87
Carrying value at 31 Dec.
69
82
Advance payments and construction in progress
Acquisition cost at 1 Jan.
13
12
Additions
2
7
Reclassifications
–13
–6
Acquisition cost at 31 Dec.
2
13
Carrying value at 1 Jan.
13
12
Carrying value at 31 Dec.
2
13
Emission rights
Acquisition cost 1 Jan.
18
40
Additions
2)
42
2
Disposals and settlements
–13
–24
Acquisition cost 31 Dec.
47
18
Accumulated amortisation and impairment at 1 Jan.
–7
–15
Impairment charges
–
–4
Impairment reversal
1
–
Disposals
2
12
Accumulated amortisation and impairment at 31 Dec.
–4
–7
Carrying value at 1 Jan.
11
25
Carrying value at 31 Dec.
43
11
Other intangible assets, total
340
342
1)
Other intangible assets consist primarily of capitalised software assets.
2)
Additions include emission rights received free of charge.
Water rights
Intangible rights include EUR 189 million (189 million) in respect of the
water rights of hydropower plants belonging to the UPM Energy seg-
ment that are deemed to have an indefinite useful life as the company has
a contractual right to exploit water resources in the energy production of
these power plants. The values of these water rights are tested annually
for impairment based on expected future cash flows of each separate
hydropower plant.