UPM Annual Report 2016

114-115 / 176

ACCOUNTS
UPM Annual Report 2016 UPM Annual Report 2016 114 115
In brief Strategy Businesses Stakeholders Governance Accounts
CONTENTS
EURm 2016 2015
In operating profit:
Impairment charges –35 –
Restructuring charges –48 –5
Change in fair value of unrealised cash flow and commodity hedges 27 –18
Capital gains on sale of non-current assets 49 6
Fair value changes of forest assets resulting from changes in estimates – 265
Other non-operational items – –22
Total –7 226
In finance costs:
Losses on sale of associates and joint ventures –2 –
Total –2 –
Total in profit before tax –9 226
In income taxes:
Taxes related to items affecting comparability 7 –44
Changes in tax rates 4 –
Total 11 –44
Total in profit for the period 1 182
Assets Capital expenditure
EURm 2016 2015 2016 2015
Finland 8,566 8,524 157 218
Germany 1,008 1,148 18 20
United States 437 491 3 5
United Kingdom 185 211 8 8
China 879 1,037 13 215
France 71 63 3 2
Uruguay 2,010 2,004 84 26
Other EU countries 325 325 33 22
Other European countries 91 71 5 2
Rest of world 340 319 1 2
Total 13,911 14,193 325 520
In 2016, items affecting in comparability in operating profit include
impairment charges of EUR 11 million relating to Madison mill closure,
EUR 23 million relating to planned closure of Steyrermühl paper
machine 3 and EUR 1 million relating to planned closure of Augsburg
paper machine 2. Restructuring charges reported as items affecting
comparability include EUR 13 million relating to Madison mill closure,
EUR 22 million relating to planned closure of Steyrermühl paper
machine 3, EUR 18 million relating to planned closure of Augsburg
paper machine 2 and income of EUR 5 million relating to reversals
of restructuring provisions of prior capacity closures. Capital gains
affecting the comparability comprise of a gain of EUR 47 million
relating to sale of Schwedt mill assets and EUR 2 million relating to
sale of other assets.
2.2 Sales
UPM generates revenue mainly from the sale of several types of
products.
UPM sells a proportion of its products to several major customers.
The largest customer in terms of sales represented approximately 3%
of UPM’s sales in 2016 and 2015, and the ten largest customers
represented approximately 16% (15%) of such sales.» Refer Note 2.1
Business areas for information on UPM products.
Accounting policies
Revenue from UPM’s product sales is recognised when the customer
takes title and assumes the risks and rewards of ownership. The timing
of revenue recognition is largely dependent on delivery terms. Group
terms of delivery are based on Incoterms 2010, the official rules for
interpretation of trade terms issued by the International Chamber of
Commerce. Revenue is recorded when the product is delivered to the
destination point for terms designated Delivered Duty Paid (“DDP”) or
Delivered at Place (“DAP”). For sales transactions designated Free on
Carrier (“FCA”), Carriage paid to (“CPT”) or Carriage and Insurance
Paid to (“CIP”), revenue is recorded at the time of shipment.
UPM sells energy to NordPool electricity market. Revenue is
recognised when electricity is transmissed.
UPM provides forest expertise and contracting services to
woodland and forestry owners. Revenues from services are recorded
when the service has been performed.
Sales are recognised net of indirect sales taxes, discounts, rebates
and cash flow hedging results of sales in foreign currency as well as
hedges of energy sales.
Sales by destination
EURm 2016 2015 Change
UPM Biorefining 2,206 2,272 –3%
UPM Energy 357 415 –14%
UPM Raflatac 1,437 1,409 2%
UPM Specialty Papers 1,273 1,168 9%
UPM Paper ENA 4,818 5,056 –5%
UPM Plywood 444 439 1%
Other operations 285 406 –30%
Eliminations –1,009 –1,027 –
Total 9,812 10,138 –3%
EURm 2016 2015
Papers in UPM Paper ENA 471 501
Fine and specialty papers in UPM Specialty
Papers 106 97
Label materials in UPM Raflatac 144 141
Plywood 41 41
Sawn timber 30 30
Chemical pulp (net effect) 33 21
The biggest factor affecting UPM’s financial results is the sales price
of paper. A change in the volume delivered has less than half of the
effect of the same percentage change in sale prices.
Items affecting comparability
Total assets and capital expenditure by country
Sales by business area
Effect of a 10% change in prices on operating profit
for the year
2.3 Operating expenses and other
operating income
Operating expenses
Operating expenses excluding forest assets fair value change, wood
harvested and share of results of associates and joint ventures are
presented below.
EURm 2016 2015
Costs and expenses
Raw materials, consumables and goods 5,376 5,784
Employee costs 1) 1,246 1,257
Other operating costs and expenses 2) 884 943
Delivery costs and other external charges 859 856
Total 8,365 8,840
1) » Refer Note 3. Employee rewards, for further information.
2) Distribution of other operating costs and expenses
EURm 2016 2015
Rents and lease expenses 48 51
Emission expenses 9 14
Losses on sale of non-current assets 3 2
Credit losses 10 18
Maintenance and other operating expenses 1) 815 858
Total 884 943
1) Other operating expenses include, among others, energy as well
as expenses related to services and group’s administration.
to be updated
Delivery of own products
10% Other fixed costs 10%
Employee costs
15%
Other variable
costs 17%
Wood and fibre
29%
Energy 8%
Fillers, coating and
chemicals 11%
Cost structure 2016
to be updated
Delivery of own products
10%
Other fixed costs 10%
Employee costs
14%
Other variable
costs 17%
Wood and fibre
29%
Energy 9% Fillers, coating and
chemicals 11%
Cost structure 2015
In 2015, fair value increase of forest assets in Finland totalling
EUR 265 million, due to adjusted long-term wood price estimates
and a change in the discount rate, is reported in items affecting
comparability. Other non-operational items affecting comparability
include EUR 19 million project expenses of Olkiluoto 4 nuclear power
plant and EUR 3 million other expenses. Capital gains affecting the
comparability comprise of a gain of EUR 3 million relating to the sale
of Tilhill Forestry Ltd shares and EUR 3 million relating to the sale of
other assets.
EURm 2016 2015
Audit services 2.3 2.3
Tax consulting 0.7 0.8
Other services 0.6 0.5
Total 3.6 3.6
Auditor’s fees
EURm 2016 2015
Finland 886 900
Germany 1,699 1,658
United States 1,217 1,253
United Kingdom 715 916
China 860 852
France 434 421
Uruguay 48 61
Other EU countries 2,099 2,103
Other European countries 383 436
Rest of world 1,472 1,538
Total 9,812 10,138
Sales by country
2%
2%
2%
13% 18% 63%