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IN BRIEF

STRATEGY

BUSINESSES

GOVERNANCE

STAKEHOLDERS

ACCOUNTS

Operating profit

*)

EUR 1,163 million

+37%

Share of certified

wood

84%

+1pp

ROE

*)

12.1%

+3.8pp

Earnings per share

*)

EUR 1.75

+50%

Employee

engagement

66%

+3pp

% of employees

completed Code of

Conduct training 90%

+2pp

Operating cash

flow per share

EUR 2.22

–5%

Supplier Code

qualified supplier

spend 79%

+12pp

Gearing

26%

–6pp

Share of ecolabelled

products

77%

+1pp

LTA frequency

3.9

–11%

Improving business

performance is

reflected in increasing

UPM operating

profit. Strong

competitiveness

mitigates risks.

ROE measures

earnings in relation

to the equity.

Engaged, high-

performing people

implement the Biofore

strategy and drive

short and long term

success.

Strong cash flow

enables organic

growth projects,

business

development and

attractive dividends.

A strong balance

sheet mitigates risks

and enables value-

enhancing strategic

actions.

Ensuring a safe working

environment and

safeguarding for

employees and

everyone working for

UPM.

The Code of

Conduct lays the

foundation for

responsible business

operations and

continuous

improvement.

Transparent supplier

requirements form

the basis of

responsible sourcing

throughout the entire

supply chain.

Ecolabels help

customers and

consumers to make

responsible choices

and promote

transparency.

Increasing EPS reflects

earnings to share­

holders, following

contributions to other

stakeholders, e.g.

employees, suppliers,

debtors and taxes.

Forest certification is

an excellent tool for

promoting sustainable

forestry.

*)

excluding special items

Financial targets

15

14

13

12

11

4,500

3,600

2,700

1,800

800

0

Net debt and gearing

EURm

Gearing %

Net debt

Gearing ratio

Gearing limit

90

72

54

36

18

0

15

14

13

12

11

12

9

6

3

0

Operating profit excluding

special items, %

Operating profit excluding

special items

% of sales

15

14

13

12

11

12

9

6

3

0

ROE excluding special items, %

Minimum target

ROE compared with target

%

At the business area level, UPM targets top relative performance in their respective markets compared

with key peers. UPMhas also defined long-termEBITDAmargin and ROCE targets for each of its

business areas. In the case of UPMPaper ENA, these long-term targets are instead defined for cash

flowmargin and cash flow return on capital employed.

In UPMEnergy, where the asset base is valued at fair value, the ROCE target is 6%. In the less

capital intensive converting industry, UPMRaflatac, the ROCE target is 18%. Finally, in the process

industry businesses UPMBiorefining, UPMPaper Asia and UPMPlywood, the ROCE target is 10-12%,

or cash return in the case of UPMPaper ENA.

With the current business portfolio, achieving the business area targets simultaneously would

result in a UPMGroup operating profit margin of approximately 10%, and ROCE of approximately 9%.

At the Group level, UPM’s financial targets are based on return on equity and gearing. The return

on equity target is at least five percentage points above the yield of a 10-year risk-free investment such

as the Finnish government’s euro-denominated bonds. At the end of 2015, the minimum target for

return on equity, as defined above, was 5.9%. For 2015, UPM’s return on equity excluding special items

was 12.1%.

The company aims to maintain a strong balance sheet. The maximum limit for gearing ratio is 90%.

At the end of 2015, gearing ratio was 26%.

UPM Annual Report 2015

11

UPM Annual Report 2015

12

UPM is committed to continuous improvement in its financial, social and environmental

performance. This is reflected in its selection of KPIs. The updated responsibility focus

areas, targets and performance indicators are presented on page 36.

20

16

12

8

4

0

20

16

12

8

4

0

20

16

12

8

4

0

20

16

12

8

4

0

20

16

12

8

4

0

20

16

12

8

4

0

Business area returns and long-term targets

ROCE %

*

)

ROCE %

ROCE %

CF/CE %

ROCE %

ROCE %

2013 2014 2015

UPM Energy

2013 2014 2015

UPM Biorefining

2013 2014 2015

UPM Paper Asia

2013 2014 2015

UPM Paper ENA

2013 2014 2015

UPM

Plywood

2013 2014 2015

UPM

Ra atac

*)

shareholdings in UPM Energy valued at fair value

Long-term return target

Key performance indicators

contents