UPM annual report 2014

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UPM Annual Report 2014 UPM Annual Report 2014 23 24
OFFICE PAPER IN HIGH DEMAND IN ASIA
The market for office papers continues to grow in the Asia Pacific region.
Key factors behind the growth include general economic growth, urbanisation
and the increasing number of offices.
To further support the development, a new production unit for manufacturing
woodfree papers and label materials is being built at the Changshu mill.
UPM has its own office paper brands for Asia and the company also acts
as a contract manufacturer for other brands, such as office equipment manufac-
turers. UPM’s own brands have a strong position particularly in China.
UPM is one of the leading office paper manufacturers in the region. With
significant local capacity, UPM is a reliable supplier whose delivery reliability
and consistent quality are well established. Responsibility in environmental
matters as well as ethical business practices bring competitive advantage.
Read more:
Business performance
Operating profit increased significantly due to
lower variable and fixed costs. Average sales
prices were slightly lower partly due to
negative currency impacts.
OUR DIRECTION
• Profitable growth in office papers
in Asia Pacific and in labelling
materials globally through
competitive production, new
capacity investment and strength-
ened partnerships with customers
by offering exceptional customer
experience
Business development
In 2014, UPM Paper Asia streamlined its organ-
isation and sharpened its customer focus. The
service and product offering were aligned with
individual customer needs.
UPM Paper Asia is capturing its share of the
growing markets by investing in new production
capacity. As part of UPM’s growth projects,
investment in the third production unit at the
UPM Changshu mill in China proceeded well in
2014 and is expected to start up by the end of
2015. The annual production capacity is 360,000
tonnes of high quality labelling materials and
woodfree uncoated papers.
• In Asia Pacific, growth in fine paper
demand is levelling off, while office paper
demand continues to grow. In 2014, office
paper demand grew by 2–4% compared to
the previous year.
• Regional office paper demand is driven by
economic activity, urbanisation and new
company establishments.
• Overcapacity prevails in all paper grades.
New investments and paper machine con-
versions to uncoated woodfree and label-
ling materials in Asia Pacific, as well as
conversions to labelling materials in
Europe have intensified the competition.
OUR STRENGTHS
• Global market leadership in labelling
materials, focusing on high quality
release liners and face papers
• Reliable supplier with high quality fine
papers in Asia Pacific with own
distribution network
• Exceptional customer service globally
and strong office paper brands in
China
• Recognised industry leader in sustain-
ability and environmental excellence
• Competitive production assets in China
and Finland
PRODUCTION SALES
o o Global market leader in
labelling materials
o o Own sales network of
fine papers in Asia
Pacific
o o Reliable supplier
o o Exceptional customer
experience
o o Recognised leader in
sustainability
UPM PAPER ASIA VALUE CREATED
Capital intensive process industry
Engaged high performing people
Community engagement
Responsible sourcing
Sustainable chemical pulp
with full traceability
Sustainable raw materials
and energy
Safe and certified products
Work safety
Employment
Career opportunity
Ethical and compliance
in global norms
Recyclable products
Low emissions
ROCE
CUSTOMERS END USES CAPITALS OUTCOMES
Labelstock
manufacturers
Siliconisers
Packaging converters
Merchants
Printers & Publishers
Merchant-owned labels
CUSTOMER-DRIVEN R&D
Outstanding
achievement in profitability The investment will enable growth,
improve local cost efficiency and enhance
global market coverage of UPM’s labelling
materials. It also provides an excellent plat-
form for strengthening strategic partnerships
with self-adhesive labelstock customers and
expanding with new products in Asia Pacific.
In February 2014, UPM decided to revise
its investment scope by specifying more
focused infrastructure investments. UPM will
upgrade existing boilers with state-of-the-art
technology to minimise environmental
impacts. With the revised plan, the investment
cost decreased to EUR 277 million from
the original EUR 390 million.
Markets and drivers
• The labelling materials market is growing
globally, in Asia Pacific in particular. In
2014, global labelling materials market
grew by 3–5%. In Asia Pacific, the growth
rate is twice as high.
• In developing markets, growth is driven by
middle class expansion and consumption
as well as by branded goods. Growth in
labelling materials is also supported by the
rapid development of retailers, distributor
networks and automated product labelling.
• In mature markets, demand is shifting
towards customer-specific labelling solu-
tions.
LABELLING MATERIALS
o o Extensive experience in high quality
release liners and face papers
o o Cost competitive production
FINE PAPERS
o o Leading office paper brands in China
o o Selectively in uncoated and coated segments
o o Cost competitive production
o o BAT (Best Available Techniques)
UPM Paper Asia
KEY FIGURES
2014 2013
Sales, EURm 1,124 1,108
Operating profit excl. special items, EURm 108 80
Capital employed (average), EURm 861 882
ROCE excl. special items, % 12.5 9.1
Personnel on 31 Dec. 1,652 1,457
100
80
60
40
20
0
2014 2013 2012
*) excl. special items
Operating profit*)
EUR million
BUSINESSES 15–30
CONTENTS
Read more on UPM Changshu
environmental investment (p. 51).