UPM annual report 2015

contents

PORTFOLIO

innovation

New business and product

development for long-term growth

UPM is developing new businesses based on its

extensive know-how and strong position in the

forest biomass sourcing and processing value

chain. Ecodesign represents business opportuni-

ties with large target markets and high added value.

BIOFUELS

Advanced renewable diesel suitable

for all diesel engines

BIOCOMPOSITES

Renewable materials to replace

oil-based materials e.g. in injection

moulding

BIOCHEMICALS

Renewable performance chemicals

and drop-in alternatives for oil-based

chemicals

Product development in the current businesses is

also an important source of competitive advantage

and growth. All business areas aim to increase the

value added for customers through product and

service development.

Business portfolio development

and value creation

UPM aims to develop its business portfolio

to increase its value, long-term profitability

and growth outlook. The target is to increase

the share of highly profitable businesses

with good fundamentals for growth.

• Top performance: UPM targets top

relative performance in each business

in their respective markets

• Grow well performing businesses:

focused, high-return growth investments

and synergistic mergers and acquisitions

• Simplify: best value realisation for UPM

• Consolidation in the European paper

market without allocating more capital

• Ability to take action: strong balance

sheet and releasing capital

growth

Pietarsaari

pulp mill

expansion

70,000 t

UPM Paper Asia

Changshu new

speciality paper

machine 360,000 t

UPM Plywood

Otepää

mill expansion

to 90,000 m

2014

2015

2016

Fray Bentos

pulp mill

expansion

100,000 t

LappeenranTa

biorefinery

120 m litres of

renewable diesel

Kymi

pulp mill

expansion

170,000 t

Kaukas

pulp mill efficiency

improvement, paper and

pulp decoupling completed

Capex so far EUR 660m

Remaining capex EUR 110m

UPM Raflatac

50% expansion in APAC,

growth in filmic labelstock

in Poland

performance

Continuous improvement

in performance

UPM implements profit improvement

actions in all businesses to further improve

cost competitiveness and advance towards

top performance in the businesses’ respec-

tive markets. UPM is committed to continu-

ous improvement in its financial, social and

environmental performance.

• The profit improvement programme,

launched in November 2014, exceeded its

target of EUR 150 million of annualised

fixed and variable cost savings by 10%

in Q4 2015

• The programme also included the

permanent closure of four publication

paper machines in Europe

• UPM aims to further improve its

resource efficiency and drive down

variable and fixed costs in 2016, too

• Good governance, industry leading envi-

ronmental performance, responsible

sourcing and a safe working environment

are important sources of competitive

advantage

IN BRIEF

STRATEGY

BUSINESSES

GOVERNANCE

STAKEHOLDERS

ACCOUNTS

UPM’s Biofore strategy includes short-term actions to drive performance, mid-term projects

to capture high-return growth opportunities and mid- to long-term development work to

create new, high value-added growth. The company is developing its business portfolio

in order to increase its value and to create growth.

UPM’s strategic focus areas

Growth projects near completion – focus turns to reaping

the benefits in 2016 and beyond

Focused growth projects

UPM invests in focused, high-return projects to

capture growth opportunities in its business

portfolio. The company is investing EUR 770

million in 2013–2016 in the following growth

projects, targeting an EBITDA impact of EUR

200 million when all the projects are fully opera-

tional.

• 10% (340,000 t) capacity increase in the

existing pulp mills

• Lappeenranta biorefinery and the start of the

UPMBiofuels business

• Labelling materials and speciality papers

expansion in China

• Increase in self-adhesive labelstock produc-

tion capacity

• Birch plywood capacity expansion in Estonia

At the end of 2015, cumulative investments in the

above projects totalled EUR 660million. In 2016,

focus turns to reaping the benefits from these

investments, as most of them are ramping up.

UPM Annual Report 2015

Grow with Biofore