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ACCOUNTS
UPM Annual Report 2016
UPM Annual Report 2016
116
117
In brief
Strategy
Businesses
Stakeholders
Governance
Accounts
CONTENTS
Research and development costs
The research and development costs included in operating expenses
were EUR 40 million (37 million) in 2016. The focus was on new
technologies and developing businesses.
Government grants
In 2016, government grants recognised as deduction of operating
expenses totalled to EUR 8 million (6 million) of which EUR 6 million
(6 million) relates to Finland, EUR 2 million (0 million) to UK and
China. In addition, the group received emission rights from govern
ments amounting to EUR 16 million (22 million) of which EUR 8 million
(9 million) relates to Finland, EUR 6 million (9 million) to Germany,
EUR 1 million (1 million) to Austria, EUR 1 million (2 million) to UK
and EUR 0 million (1 million) to France.
EURm
2016
2015
Carrying value, at 1 January
52
43
Emission rights received and purchased
14
24
Deliveries and disposals
–14
–15
Impairment
–7
–
Translation differences
–1
–
Carrying value, at 31 December
45
52
Accumulated costs
52
54
Accumulated impairments
–7
–2
Carrying value, at 31 December
45
52
EURm
2016
2015
Gains on sale of non-current assets
59
20
Rental income
16
15
Emission rights received
16
22
Derivatives, non-qualifying hedges
28
–78
Exchange rate gains and losses
6
18
Other
16
16
Total
140
13
In 2016, gains on sale of non-current assets includes EUR 47 million
related to sale of Schwedt mill assets.
Accounting policies
Research and development costs
Research and development costs are expensed as incurred, except for
certain development costs, which are capitalised as they generate
future economic benefits, and UPM can the measure the cost reliably.
Capitalised development costs are amortised on a systematic basis
over their expected useful lives, usually not exceeding five years.
Government grants
Government grants are recognised at fair value where there is a
reasonable assurance that the grant will be received and the group
will comply with the attached conditions. Government grants relating
to the purchase of property, plant and equipment are deducted from
2016
2015
Profit attributable to owners of the parent
company, EURm
879
916
Weighted average no. of shares (1,000)
533,505 533,505
Basic earnings per share, EUR
1.65
1.72
Diluted earnings per share, EUR
1.65
1.72
Accounting policies
Earnings per share
Earnings per share (EPS) is the amount of profit for the period
attributable to each ordinary share. The basic earnings per share are
computed using the weighted average number of shares outstanding
during the period. Diluted earnings per share are computed using the
weighted average number of shares outstanding during the period
plus the dilutive effect of share options. The group did not have share-
option schemes at the end of 2016 and 2015.
Dividend
Dividend distribution to the owners of the parent company is
recognised as a liability in the group’s consolidated financial
statements in the period in which the dividends are approved by the
parent company’s shareholders.
Other operating income
Earnings per share
Emission rights
The group has recognised in Other operating income of EUR 16
million (22 million) income and under Other operating costs and
expenses of EUR 9 million (14 million) expenses relating to CO
2
emissions. The liability to cover the obligation to return emission rights
amounted to EUR 9 million (14 million) and is recognised in
provisions. The emission rights recognised in intangible assets are
specified below.
the acquisition cost of the asset and accordingly directly reduce the
annual depreciation of the underlying asset. Other government grants
are recognised in the income statement in the period necessary to
match them with the costs they are intended to compensate.
Other operating income
Other operating income mainly includes gains on the disposal of
non-current assets and rental income. Further, other operating income
includes foreign exchange gains and losses in respect of UPM’s
normal business activities. Gains and losses on derivatives not
qualifying hedge accounting are also recognised in other operating
income.
Emission rights
The group participates in the European Emissions Trading Scheme
aimed at reducing greenhouse gas emissions. Emission rights received
from governments free of charge to emit a fixed tonnage of carbon
dioxide in a fixed period of time give rise to an intangible asset for the
emission rights, a government grant and a liability for the obligation
to deliver emission rights equal to the emissions that have been made
during the compliance period. Emission rights are initially recognised
as intangible assets based on market value at the date of initial
recognition. Emission rights are not amortised. If the market price of
emissions rights at the balance sheet date is less than the recognised
costs, any surplus emission rights that are not required to cover actual
and estimated emissions during the financial year, are impaired to the
market price.
Government grants are recognised as deferred income in the
balance sheet at the same time as emission rights and are recognised
in other operating income in the income statement, systematically,
over the compliance period to which the corresponding emission
rights relate.
The liability to deliver emission rights is recognised based on
actual emissions. The emissions realised are expensed under other
operating costs and expenses in the income statement and presented
as a provision in the balance sheet. The liability is settled using
emission rights on hand, measured at the carrying amount of those
emission rights. Emission rights and associated provisions are
derecognised when disposed. Any profit or loss represents the costs
of purchasing additional rights to cover excess emissions, the sale of
unused rights in the case realised emission are under emission rights
received free of charge or the impairment of unused emission rights.
2.4 Earnings per share and dividend
According to UPM dividend policy approved by the Board of Directors
in 2015, the company aims to pay an attractive dividend amounting
to 30-40% of the group annual operating cash flow per share.
The dividend paid in 2016 were EUR 400 million (EUR 0.75 per
share) which is 34% of the operating cash flow per share and in 2015
EUR 373 million (EUR 0.70 per share). The Board of Directors
proposes to the Annual General Meeting that a dividend of EUR
506.8 million, EUR 0.95 per share, will be paid in respect of 2016.
The proposed dividend represents 30% of UPM’s operating cash flow
per share for the year 2016.
3.
Employee rewards
3.1 Employee costs
EURm
2016
2015
Salaries and fees
969
967
Share-based payments
24
16
Pension and other post-employment benefits,
defined benefit plans
21
32
Pension costs, defined contribution plans
107
117
Other indirect employee costs
1)
124
125
Total
1,246
1,257
1)
Other indirect employee expenses primarily include other statutory social
expenses, excluding pension expenses
.
3.2 Key management personnel
Remuneration policy
The Annual General Meeting 2016 decided to leave the Board
remuneration unchanged. The Chairman of the Board receives an
annual fee of EUR 175,000, Deputy Chairman of the Board and
Chairman of the Audit Committee EUR 120,000 and other members
of the Board EUR 95,000. No annual fee is paid to the President and
CEO for his role as a member of the Board. The annual fee is settled
partly in company’s shares and partly in cash so that 40% of the fee
is paid in the company shares to be acquired on the Board members’
behalf, and the rest in cash. The company pays the costs and transfer
tax payable related to the acquisition of the company shares.
In 2016, 4,235 (4,193) company shares were paid to the
Chairman, 2,904 (2,875) shares to the Deputy Chairman and the
Chairman of the Audit Committee respectively and 2,299 (2,276)
shares to each of the other members of the Board.
Shareholdings (no. of shares) and fees of the Board of Directors
Shareholdings 31 December
Fees (EUR 1,000)
2016
2015
2016
2015
Board members
Björn Wahlroos, Chairman
256,677
254,442
175
175
Berndt Brunow, Debuty Chairman
306,482
303,578
120
120
Henrik Ehrnrooth
4,575
2,276
95
95
Piia-Noora Kauppi
14,460
11,856
120
120
Wendy E. Lane
35,224
32,925
95
95
Jussi Pesonen, President and CEO
304,064
220,275
–
–
Ari Puheloinen
6,600
4,301
95
95
Veli-Matti Reinikkala
38,396
36,097
95
95
Suzanne Thoma
4,575
2,276
95
95
Kim Wahl
16,374
14,075
95
95
Total
987,427
882,101
985
985
13 14 15 16
12
■
Earnings per share
■
Dividend per share
(2016: proposal)
EUR
Earnings and dividend per share
2.00
1.60
1.20
0.80
0.40
0
–2.14