UPM annual report 2015

34-35 / 158

UPM Annual Report 2015 UPM Annual Report 2015 31 32
contents
Investing in growth
Business performance
Operating profit increased because of lower variable costs, partly driven by favourable
currency development and improved cost efficiency. Delivery volumes increased.
Return on capital employed increased, significantly exceeding the long-term target.
Business development
UPMPlywood’s performance improved further. Delivery volumes increased due
to improved customer focus and customer-oriented approach, partly mitigating
the negative impacts of increased competition of plywood imports fromRussia and
South America.
Improved production flexibility enabled UPMPlywood to respond to customer
demand with increased production. Deliveries to demanding industrial end-use
applications such as trailer manufacturers and LNG (liquefied natural gas) carriers
increased. As a whole, construction activity in Europe remained subdued.
In the area of road freight applications, UPMPlywood has provided expertise to
customers’ product and production development introducing both economic and
environmental benefits. UPMhas experienced rapid growth in the trailer segment in
past years and in 2015, new customer agreements were also signed outside Europe.
UPMPlywood has seen solid growth in the LNG segment in past years. WISA
birch plywood is ideal material in LNG vessels due to its strength and stability at
extremely low temperatures. Investment activity in the LNG industry is high and the
outlook remains good.
In April, UPM decided to expand its Otepää plywood mill in Estonia. The expan-
sion will almost double the mill’s production to 90,000 m3 per annum. The expansion
increases UPMPlywood’s capability to deliver competitive high quality birch ply-
wood to demanding end-use segments and serve key customer industries effectively.
The investments in Otepää total to approximately EUR 40 million and will be com-
pleted by the end of 2016.
In 2015, UPMPlywood continued developing the thermoformable UPMGrada
wood material. New products were launched with lower forming temperatures than
before and improved form pressing process efficiency. UPMGrada is ecologically
designed and safe for use, as the material is free from harmful compounds. In 2015,
the distribution network including agents was expanded to cover the whole of
Europe. The first mass production line using thermoformable UPMGrada wood
material was started up at the Finnish furniture manufacturer Isku’s Lahti mill in
Finland.
In October, UPMPlywood started a programme to improve the cost competitive-
ness of its Finnish birch plywood mills. Central elements of the programme are to
increase production volumes at the UPM Savonlinna and Joensuu mills to reduce
unit costs. At the UPM Jyväskylä mill production was streamlined and mill cleaning
was outsourced.
OUR DIRECTION
• Profitable growth through customer-
oriented service and operational
excellence
• Strengthen our market position in
selected businesses by increasing
value and service offering
OUR STRENGTHs
• Reliable supplier with consistent
high quality
• Superior customer service
• Leading supplier in demanding
end-use segments
• Strongest brand in the market – WISA®
KEY FIGURES
2015 2014
Sales, EURm 439 440
Operating profit excl. special items, EURm 55 44
Capital employed (average), EURm 263 268
ROCE excl. special items, % 20.9 16.4
Personnel on 31 Dec. 2,469 2,441
75
60
45
30
15
0
2015 2014 2013
*) excl. special items
Operating profit*)
EUR million
PRODUCTION
PLYWOOD MILLS
(SPRUCE)
PLYWOOD MILLS
(BIRCH)
VENEER MILL
(SPRUCE)
SALES
o o Leading supplier in
demanding end uses
o o High quality
o o Supply chain services
o o Professional technical
services
o o Reliable supplier
o o Strong brand
UPM Plywood value created
CAPITALS
Moderately labour and capital
intensive industry
Engaged high performing people
Community engagement
Responsible sourcing
Sustainably sourced wood from
certified sources with full traceability
Sustainable energy
OUTCOMES
Safe and certified
products
Carbon storing products
Employment
Work safety
Vitality of local
communities
Low emissions
ROCE
CUSTOMER
INDUSTRIES
Construction
LNG shipbuilding
Vehicle flooring
Parquet
Other industrial
manufacturing
END USES
IN BRIEF STRATEGY BUSINESSES GOVERNANCE STAKEHOLDERS ACCOUNTS
In November, UPMPlywood made a decision to curtail the production of softwood
plywood at its Pellos mills in Finland during the end of 2015 and first half of 2016 due to
increased imports of low-priced softwood plywood to Europe from South America.
Markets and drivers
• In 2015, plywood demand in Europe is estimated to have increased slightly. Demand
grew in both industrial applications and construction-related end-use segments.
• The plywood market in Europe was in balance during the first half of 2015. Low-priced
imports increased over the course of the year, leading to price pressure in some product
segments in the fourth quarter.
• Plywood demand is driven by activity in the building and construction and furniture
industries as well as industrial end-use segments such as transportation.
• In the building and construction industry, wood material is increasingly used because
it is a cost effective material and a renewable resource.
• In the transportation industry, construction of LNG vessels is driven by global demand
for LNG. Road transportation is growing for the benefit of trade, requiring environmen-
tally sound trailer solutions.
Product and process development
UPM Grada cuts manufacturing
time in half
Finnish furniture manufacturer Isku began using
UPM Grada wood material and managed to cut
the manufacturing time of form-pressed
components in half compared to the traditional
manufacturing method.
In order to be able to benefit from Grada
technology, a new automated manufacturing line
was constructed at the Isku factory in Lahti,
Finland. The new line was taken into commercial
use in September 2015. The line is used to
manufacture components for chairs, tables and
school furniture, for example.
Essential time savings have been achieved by
using industrial robots and other automated
systems to carry out work that previously required
a lot of manual labour. According to CEO Arto
Tiitinen from Isku, the use of UPM Grada, a
material developed and patented by UPM, will
strengthen the furniture company’s position in the
international furniture market.
“In order to succeed in hard competition, top-class
design is a must as well as taking a front runner
position in applying new materials and
techniques,” Tiitinen says. The unique properties
of UPM Grada provide designers with entirely
new opportunities for creating modern furniture.
Designers appreciate the slenderness, durability
and uniform quality of the easily mouldable
material.
Read more:
,
UPM Plywood