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UPM Annual Report 2014
UPM Annual Report 2014
95
96
CONTENTS
ACCOUNTS
There have been no transfers between levels.
The following table presents the changes in Level 3 instruments
for the year ended 31 December 2014
EURm
Available-
for-sale
investments
Opening balance
2,661
Additions
31
Disposals
–1
Transfers into Level 3
–
Transfers from Level 3
–10
Translation differences
2
Gains and losses
Recognised in income statement,
under gains on available-for-sale investments
–
Recognised in statement of
comprehensive income, under available-for-sale investments
–173
Closing balance
2,510
The following table presents the changes in Level 3 instruments
for the year ended 31 December 2013
EURm
Available-
for-sale
investments
Opening balance
2,587
Additions
31
Transfers into Level 3
1
Transfers from Level 3
–
Gains and losses
Recognised in income statement,
under gains on available-for-sale
investments
–1
Recognised in statement of
comprehensive income, under
available-for-sale investments
43
Closing balance
2,661
4 Segment Information
The Group’s management has determined the operating segments based
on management reporting regularly reviewed by the Group’s chief oper-
ating decision maker. The chief operating decision maker has been
identified as the Group’s President and CEO.
The operating segments are organised on a product basis.
UPM’s business structure consists of the following business areas
and reporting segments: UPM Biorefining, UPM Energy,
UPM Raflatac, UPM Paper Asia, UPM Paper ENA (Europe and North
America) and UPM Plywood. Wood sourcing and forestry, UPM Bio-
composites, UPM Biochemicals business units and Group services are
reported in Other operations.
Reportable segments
UPM Biorefining
UPM Biorefining segment consists of pulp, timber and biofuels busi-
nesses. UPM has three pulp mills in Finland, one pulp mill and planta-
tion operations in Uruguay and four sawmills in Finland. UPM’s biore-
finery for producing wood-based renewable diesel has started up in
January 2015 in Finland.
UPM Energy
UPM Energy segment operates in power generation and physical and
derivatives trading. The segment consist of UPM’s hydro power assets in
Finland and shareholdings in energy companies
UPM Raflatac
UPM Raflatac segment manufactures self-adhesive label materials for
product and information labelling.
UPM Paper Asia
UPM Paper Asia segment consists of UPM Changshu paper mill in
China and label paper operations in the Tervasaari and Jämsänkoski
mills in Finland.
UPM Paper ENA
UPM Paper ENA segment produces magazine paper, newsprint and fine
paper in Europe and North America.
UPM Plywood
UPM Plywood segment produces plywood and veneer products in Fin-
land, Estonia and Russia.
Other operations
Other operations include wood sourcing and forestry, UPM Bio-
composites, UPM Biochemicals business units and Group services.
The information reported for each segment is the measure of what the
Group’s President and CEO uses internally for evaluating segment per-
formance and deciding on how to allocate resources to operating seg-
ments.
The performance of an operating segment is evaluated primarily
based on the segment’s operating profit. The joint operation Madison
Paper Industries (MPI) is reported as subsidiary in UPM Paper ENA
segment reporting. In addition, the changes in fair value of unrealised
commodity hedges are not allocated to segments. Otherwise the seg-
ment’s operating profit is measured on a basis consistent with the consol-
idated financial statements. Sales between the segments are based on
market prices.
The amounts provided to the President and CEO in respect of seg-
ment assets and liabilities are measured on a basis consistent with con-
solidated financial statements. Assets and liabilities are allocated to the
segments based on segment operations. Unallocated assets and liabilities
comprise other than energy shares under available-for-sale investments,
non-current financial assets, deferred tax assets and liabilities, other non-
current assets, income tax receivables and payables, cash and cash equiv-
alents, assets classified as held for sale and related liabilities, retirement
benefit obligations, provisions, interest-bearing liabilities and other liabil-
ities and payables.
Segment information for the year ended 31 December 2014
EURm
UPM
Biorefining
UPM
Energy
UPM
Raflatac
UPM
Paper
Asia
UPM
Paper
ENA
UPM
Plywood
Other
operations
Eliminations
and reconci-
liations
8)
Group
External sales
1,374
251 1,248
939 5,216
415
442
–17
9,868
Internal sales
563
213
–
185
68
25
5
–1,059
–
Total sales
1)
1,937
464 1,248 1,124 5,284
440
447
–1,076
9,868
Share of results of associates and joint ventures
1
–
–
–
1
–
1
–
3
Operating profit
223
202
69
108
–32
44
82
–22
674
Finance costs, net
–7
Income taxes
–155
Profit (loss) for the period
512
Special items in operating profit
2)
6
–
–11
–
–213
–
45
–
–173
Operating profit excluding special items
217
202
80
108
181
44
37
–22
847
Assets
3)
3,171 2,826
678 1,008 2,754
284 1,605
–246
12,080
Unallocated assets
2,115
Total assets
14,195
Liabilities
4)
170
8
125
86
451
26
188
–191
863
Unallocated liabilities
5,852
Total liabilities
6,715
Other items
Depreciation and amortisation
151
11
32
80
213
24
11
–2
520
Impairment charge
–1
–
3
–
136
–
–
–
138
Capital expenditure
5)
151
35
24
84
102
8
8
–1
411
Capital expenditure,
excluding acquisitions and shares
147
3
24
84
102
8
8
–1
375
Capital employed, 31 December
6)
3,002 2,818
553
922 2,303
257 1,417
–328
10,944
Capital employed, average
2,862 2,903
530
861 2,511
268 1,445
–117
11,263
Return on capital employed,
excluding special items %
7)
7.6
7.0
15.1
12.5
7.2
16.4
2.6
18.8
7.5
Personnel at year end
2,529
80 2,847 1,652 10,467 2,441
509
–111
20,414
Personnel, average
2,612
85 2,845 1,663 10,735 2,463
559
–110
20,852
1)
The Group's sales comprise mainly of product sales.
2)
In 2014, special income of EUR 5 million in the UPM Biorefining segment relate to a gain on sale of property, plant and equipment and income of EUR 1 million relate to
restructuring measures. In the UPM Raflatac segment special items of EUR 11 million relate to restructuring charges, including impairments of EUR 3 million. In the UPM Paper
ENA segment special items include write-offs totalling EUR 135 million and restructuring charges totalling EUR 73 million related to planned capacity closures and charges
of EUR 5 million related to other restructuring measures, mainly to the closure of the UPM Docelles mill in France, including impairment charges of EUR 1 million. In the Other
operations special items relate to a capital gain of EUR 45 million from the sale of forestland in the UK.
3)
Segment assets include goodwill, other intangible assets, property, plant and equipment, investment property, biological assets and investments in associated companies and
joint ventures, available-for-sale investments, inventories and trade receivables.
4)
Segment liabilities include trade payables and advances received.
5)
Capital expenditure includes goodwill arising from business combinations, other intangible assets, property, plant and equipment, investment property, and investments in as-
sociated companies and joint ventures and other shares.
6)
Capital employed is segment assets less segment liabilities. Eliminations and reconciliations include unallocated assets and unallocated non-interest-bearing liabilities.
7)
Formulae for calculation of the return on capital employed; for segments: Operating profit excluding special items/Capital employed (average) x 100, for the Group: (Profit
before tax + interest expenses and other financial expenses–special items)/(Total equity+interest bearing liabilities (average)) x 100.
8)
Eliminations and reconciliations include the elimination of internal sales and internal inventory margin and the consolidation of MPI as a joint operation. In addition the changes
in fair value of unrealised commodity hedges that are not allocated to segments are included in reconciliations.