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UPM Annual Report 2015
UPM Annual Report 2015
109
110
contents
accounts
IN BRIEF
STRATEGY
BUSINESSES
STAKEHOLDERS
GOVERNANCE
ACCOUNTS
In accordance with the service contract, the retirement age of the
President and CEO Jussi Pesonen is 60. For the President and CEO,
the target pension is 60% of the average indexed earnings from the
last ten years of employment calculated according to the Finnish statu-
tory pension scheme. The costs of lowering the retirement age to 60 is
covered by supplementing the statutory pension with a voluntary
defined benefit pension plan. Should the President and CEO leave the
company before reaching the age of 60, an immediate vesting right
corresponding to 100% of earned pension (pro rata) will be applied.
The retirement age of the other members of the Group Executive Team
is 63. The expenses of the President and CEO's defined benefit pen-
sion plan in 2015 were EUR 0.6 million (0.5 million), and the plan
assets amounted to EUR 1.6 million (6.6 million) and obligation to EUR
0.9 million (5.1 million). Other Group Executive Team members are
under defined contribution plans.
In case the notice of termination is given to the President and CEO,
a severance pay of 24 months' base salary will be paid in addition to
the salary for six months' notice period. Should the President and CEO
give a notice of termination to the company, no severance pay will be
paid in addition to the salary for the notice period. For other members
of the Group Executive Team, the period for severance pay is 12
months, in addition to the six months’ salary for the notice period,
unless notice is given for reasons that are solely attributable to the
executive.
If there is a change in the control over the company, the President
and CEO may terminate his service contract within three months and
each member of the Group Executive Team may terminate his/her ser-
vice contract within one month from the date of the event that triggered
the change of control and shall receive compensation equivalent to 24
months' base salary.
Auditor's fees
Year ended 31 December
EURm
2015 2014
Audit
2.3
2.0
Tax consulting
0.8
0.6
Other services
0.5
0.5
Total
3.6
3.1
8 Change in fair value of biological assets
and wood harvested
Year ended 31 December
EURm
2015 2014
Wood harvested
–91 –91
Change in fair value
443 169
Total
352
78
9 Share of results of associated companies
and joint ventures
Year ended 31 December
EURm
2015 2014
Associated companies
2
3
Joint ventures
1
–
Total
3
3
10 Depreciation, amortisation and
impairment charges
Year ended 31 December
EURm
2015 2014
Amortisation of intangible assets
Intangible rights
8
16
Other intangible assets
25
30
33
46
Depreciation of property, plant and equipment
Buildings
82
81
Machinery and equipment
388 373
Other tangible assets
17
17
487 471
Depreciation of investment property
Buildings
3
3
Other assets
1
1
4
4
Impairment charges of intangible assets
Emission allowances
–
–1
–
–1
Impairment charges of property, plant and equipment
Land areas
–
1
Buildings
–
42
Machinery and equipment
–
93
Other tangible assets
–
2
–
138
Total
524 658
In 2015, no impairment charges were recognised in property, plant
and equipment.
In 2014, the Group recognised impairment charges of EUR 135
million in UPM Paper ENA related to the plan to permanently close
four of its paper machines: PM3 at UPM Chapelle, PM1 at UPM Shot-
ton, PM5 at UPM Jämsänkoski and PM2 at UPM Kaukas. In addition,
impairment charges of EUR 3 million related to restructuring in the
UPM Raflatac were recognised in property, plant and equipment.
11 Gains on available-for-sale investments, net
Year ended 31 December
EURm
2015 2014
Net gains and losses on disposals
1)
–
59
Total
–
59
1)
In 2014, includes a gain of EUR 59 million related to the sale of Metsä Fibre Oy
shares in 2012.
12 Finance costs
Year ended 31 December
EURm
2015 2014
Exchange rate and fair value gains and losses
Derivatives held for trading
85
96
Fair value gains on derivatives designated
as fair value hedges
–13
51
Fair value adjustment of interest-bearing liabilities
attributable to interest rate risk
5
–50
Fair value adjustment of firm commitments attributable
to foreign exchange risk
3
5
Foreign exchange gains/losses on financial liabilities
measured at amortised cost
–105 –123
Foreign exchange gains/losses on loans and
receivables
13
17
Other exchange rate and fair value gains and losses
13
–
1
–4
Interest and other finance costs, net
Interest expense on financial liabilities measured
at amortised cost
–122 –148
Interest income on derivative financial instruments
75
90
Interest income on loans and receivables
5
15
Other financial expenses
–26
–19
–68
–62
Total
–67 –66
Net gains and losses on derivative financial instruments
included in the operating profit
Year ended 31 December
EURm
2015 2014
Derivatives designated as cash flow hedges
–101
30
Derivatives held for trading
–78
–53
Total
–179
–23
The aggregate foreign exchange gains and losses
included in the consolidated income statement
Year ended 31 December
EURm
2015 2014
Sales
–100
11
Other operating income
18
23
Net financial items
6
–11
Total
–76
23
13 Income taxes
Year ended 31 December
EURm
2015 2014
Current tax expense
95
100
Change in deferred taxes (Note 28)
64
55
Income taxes, total
159
155
Income tax reconciliation statement
Profit (loss) before tax
1,075
667
Computed tax at Finnish statutory rate of 20%
215
133
Difference between Finnish and foreign rates
16
9
Non-deductible expenses and tax-exempt income
–63
–27
Tax loss with no tax benefit
11
25
Results of associated companies
–1
–1
Change in tax legislation
–1
1
Change in recoverability of deferred tax assets
–
19
Utilisation of previously unrecognised tax losses
–6
–5
Other
–12
1
Income taxes, total
159
155
Effective tax rate
14.8% 23.2%
Profit before taxes for 2015 and 2014 include income not subject to
tax from subsidiary operating in tax free zone.
In 2015, other items include EUR 9 million tax benefit related to
capital gain from sale of forestland in UK in 2014 where tax authori-
ties accepted treatment of the gain as tax-exempt in 2015.
In 2014, change in recoverability of deferred tax assets relates to
reassessment of estimated recoverability of deferred tax assets in
France.
Tax effects of components of other comprehensive income
Year ended 31 December
EURm
2015
2014
Before
tax Tax
After
tax
Before
tax Tax
After
tax
Actuarial gains and losses on
defined benefit obligations
153 –40 113 –235 54 –181
Translation differences
221 – 221 291 – 291
Net investment hedge
–26 –2 –28 –51 10 –41
Cash flow hedges
30 –6 24 –133 26 –107
Available-for-sale investments –424 19 –405 –173 9 –164
Other comprehensive income –46 –29 –75 –301 99 –202
14 Earnings per share
Year ended 31 December
2015 2014
Profit (loss) attributable to owners of
the parent company, EURm
916
512
Weighted average number of shares (1,000)
533,505 531,574
Basic earnings per share, EUR
1.72
0.96
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
916
512
Profit (loss) used to determine diluted earnings
per share, EURm
916
512
Weighted average number of shares (1,000)
533,505 531,574
Weighted average number of shares for
diluted earnings per share (1,000)
533,505 531,574
Diluted earnings per share, EUR
1.72
0.96
15 Dividend per share
The dividends paid in 2015 were EUR 373 million (EUR 0.70 per
share) and in 2014 EUR 319 million (EUR 0.60 per share). The Board
of Directors proposes to the Annual General Meeting that a dividend
of EUR 400 million, EUR 0.75 per share, will be paid in respect of
2015.
16 Goodwill
As at 31 December
EURm
2015
2014
Carrying value at 1 Jan.
230
219
Translation differences
11
11
Carrying value at 31 Dec.
241
230