UPM annual report 2015

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UPM Annual Report 2015 UPM Annual Report 2015 27 28
contents
Business performance
Operating profit decreased mainly due to the negative impact of currency hedging.
Return on capital employed decreased and was short of the long-term target.
Business development
In 2015, UPMPaper Asia completed the investment in a third production unit at the
UPMChangshu mill in China. Production started in December. The new unit, part of
UPM’s growth investments, facilitates growth in labelling materials and release liner
markets globally, in the Asian office and graphic paper market as well as in various
converting end uses. The annual production capacity is 360,000 tonnes.
The investment further strengthens UPMPaper Asia’s unique position on the Asian
market. The business area is headquartered from Shanghai within the fast growing
region in China. The production operations in Changshu are conveniently located close
to Shanghai and next to the Yangtze river, providing logistical competitiveness. UPM
Paper Asia has an extensive sales and distribution network throughout Asia and is a
recognised industry leader in sustainability and environmental excellence globally.
The new production unit enables growth, improves local cost efficiency and
enhances global market coverage of UPMPaper Asia’s labelling materials and release
liners. Due to shorter lead times, the new unit provides an excellent platform for
strengthening partnerships with customers through improved capability to provide a
full range of services and new products in Asia Pacific. Thus far production has been
concentrated to two mills in Finland. The unit will also improve production flexibility
for the European and North American markets. Global labelling materials demand
growth is primarily driven by economic growth in emerging markets as well as growth
in automated product and logistics labelling, meanwhile demand for release liner, as a
carrier of adhesive materials used e.g. in various fastening systems of hygiene, graphic,
industrial applications or in manufacturing, has a wide variety of end uses with robust
growth outlook.
UPMPaper Asia holds a strong position in office papers in China and selectively in
coated and uncoated fine papers in Asia. Graphic fine paper demand is in slight decline,
whereas the new production unit particularly responds to continued growth in office
papers and various converting applications, driven primarily by economic activity in the
region. UPM’s success on the Asian fine paper market is supported by high quality prod-
ucts, well established own brands, excellence in sustainability, and exceptional customer
experience through an extensive own sales and distribution network. UPMPaper Asia’s
growth opportunities have been restricted by capacity.
OUR DIRECTION
• In Label, Pack & Release, profitable
growth globally through competitive
production, innovations and strengthened
partnerships with customers by offering
an exceptional customer experience and
leading sustainability performance
• In Fine Paper Asia-Pacific, profitable
growth in high quality office papers,
new innovations through strengthened
partnerships with customers achieved by
offering exceptional customer experience
and leading sustainability performance
OUR STRENGTHs
• Global market leadership in labelling
materials, focusing on high quality release
liners, face papers and flexible packaging
papers
• Reliable supplier with high quality fine
papers in Asia Pacific with extensive
distribution network
• Exceptional customer service globally
and strong office paper brands in China
• Recognised industry leader in sustaina­
bility and environmental excellence
• Cost efficient operations with unique
position on the Asian market
KEY FIGURES
2015 2014
Sales, EURm 1,168 1,124
Operating profit excl. special items, EURm 55 108
Capital employed (average), EURm 1,012 861
ROCE excl. special items, % 5.4 12.5
Personnel on 31 Dec. 1,738 1,652
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
CAPITALS
Capital intensive
process industry
Engaged high
performing people
Community engagement
Responsible sourcing
Sustainable chemical pulp
with full traceability
OUTCOMES
Safe and certified products
Work safety
Employment
Career opportunity
Ethical and compliance
in global norms
Recyclable products
Low emissions
ROCE
CUSTOMERS
Labelstock
manufacturers
Siliconisers
Packaging converters
Merchants
Printers & Publishers
Merchant-owned labels
END USES
IN BRIEF STRATEGY BUSINESSES GOVERNANCE STAKEHOLDERS ACCOUNTS
Markets and drivers
• The labelling materials and release liner market is growing globally, particularly in Asia
Pacific. In 2015, the global market grew by 3–5%. In Asia Pacific, the growth rate was even
twice as high.
• In developing markets, growth is driven by private consumption, middle class expansion
and branded goods. Growth is also supported by the rapid development of retailers and
automated product labelling. Moreover, release liner demand is driven by increasing use
of pressure sensitive adhesive materials in consumer products, industrial applications
and the manufacturing industry.
• In Asia Pacific, fine paper demand somewhat decreased, while office paper demand grew
by 2–3% in 2015 compared to 2014.
• Regional office paper demand is driven by economic activity, urbanisation and new
company establishments.
• In Asia overcapacity prevails in all paper grades and US anti-dumping and countervailing
duties on some Asian producers are adding regional fine paper supply. New investments and
paper machine conversions to uncoated wood-free and labellingmaterials in Asia Pacific,
as well as conversions to labellingmaterials in Europe have intensified the competition.
125
100
75
50
25
0
2015 2014 2013
*) excl. special items
Operating profit *)
EUR million
PRODUCTION
Label, Pack & Release
o o Extensive experience in high quality release
liners and face papers, selectively in flexible
packaging papers
o o Cost efficient production
Fine Paper Asia-Pacific
o o Leading office paper brands in China
o o Selectively in uncoated and coated segments
o o Cost efficient production
o o BAT (Best Available Techniques)
CUSTOMER-DRIVEN R&D
Preparing for growth UPM Paper Asia
A Chinese project with focus
on safety
UPM has completed its new paper machine
project at the UPM Changshu mill in China
not only on time, but with an enviable safety
record. Strict safety rules were implemented
throughout the entire project which reached
over four million hours’ work time without
a single lost time accident (LTA).
Since dozens of contractors and suppliers
were involved in the project, a comprehensive
occupational health and safety (OHS) plan
was produced and distributed to every new
supplier.
This time much of the equipment was sourced
from China. All of the subcontractors were
selected by UPM and were mainly local
companies. Also UPM’s largest environmental
investment in 2015 was linked to the project
as the wastewater treatment plant was
expanded and air protection technology was
upgraded.
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