UPM Annual Report 2016

132-133 / 176

ACCOUNTS
UPM Annual Report 2016 UPM Annual Report 2016 132 133
In brief Strategy Businesses Stakeholders Governance Accounts
CONTENTS
EURm 2016 2015
Bonds 717 1,165
Loans from financial institutions 664 1,013
Pension loans 77 158
Finance leases 106 167
Derivatives 34 71
Other loans 236 223
Non-current debt 1,835 2,797
Repayments of non-current debt 477 144
Derivatives 82 21
Other liabilities 26 104
Current debt 585 269
Total debt 2,419 3,066
Loan receivables 11 10
Derivatives 216 278
Other receivables 32 30
Non-current interest-bearing assets 259 318
Loan receivables 6 5
Derivatives 12 9
Other receivables 19 8
Cash and cash equivalents 992 626
Current interest-bearing assets 1,030 648
Total interest-bearing assets 1,289 966
Net debt 1,131 2,100
5.2 Net debt
13 14 15 16 12
3,500
2,800
2,100
1,400
700
0
EURm
Net debt
50
40
30
20
10
0
Gearing %
13 14 15 16 12
1,500
1,200
900
600
300
0
EURm
Free cash flow
Reported in financing activities in cash flow statement
EURm
NON-CURRENT
LOANS INCL.
REPAYMENTS
FINANCE
LEASES
CURRENT
LOANS
NET
DERIVATIVES
OTHER
FINANCIAL
ASSETS
CASH AND
CASH
EQUIVALENTS NET DEBT
Carrying value, at 1 January –2,978 –272 –74 166 57 700 –2,401
Change in net debt, cash:
Proceeds from non-current debt –22 – – – – – –22
Payments of non-current debt 439 80 – – – – 519
Change in current liabilities – – –22 – – – –22
Net cash flows from derivatives – – – –43 – – –43
Change in other financial assets in
operating cash flow – – – – –3 – –3
Change in cash and cash equivalents – – – – – –75 –75
417 80 –22 –43 –3 –75 354
Change in net debt, non-cash:
Fair value gains and losses 5 – – 72 – – 77
Exchange gains and losses –105 –1 –8 – –1 1 –114
Effective interest rate adjustment –11 – – – – – –11
Other non-cash changes – –5 – – – – –5
–111 –6 –8 72 –1 1 –53
Carrying value, at 31 December –2,672 –198 –104 195 53 626 –2,100
EURm 2016 2015
Operating cash flow 1,686 1,185
Investing cash flow –262 –435
Free cash flow 1,424 750
Dividends paid –400 –373
Other financing cash flow –19 –20
Change in other financial assets in operating
cash flow 13 –3
Change in other financial assets in investing
cash flow 2 –
Change in net debt, cash 1,020 354
Change in net debt, non-cash –51 –53
Decrease in net debt 969 301
Opening net debt –2,100 –2,401
Closing net debt –1,131 –2,100
Free cash flow
Free cash flow is primarily a liquidity measure. It is an important
indicator of UPM’s overall operational performance as it reflects the
cash generated from operations after investing activities. UPM’s free
cash flow has enabled payment of dividends as well as repayments
of debt reducing net debt significantly.
Accounting policies
Debt
Debt comprising of bonds, bank and pension loans and other loans
is recognised initially at fair value, net of transaction costs and
subsequently measured at amortised cost using the effective interest
method. Any difference between proceeds (net of transaction costs)
and the redemption value is recognised in the income statement over
the estimated life of the borrowing. UPM classifies debt as non-current
unless due for settlement within a year. Most of the debt is hedged in
a fair value hedge relationship as described in » Note 6.1 Financial
risk management.
Net debt
Change in net debt 2015
Reported in financing activities in cash flow statement
EURm
NON-CURRENT
LOANS INCL.
REPAYMENTS
FINANCE
LEASES
CURRENT
LOANS
NET
DERIVATIVES
OTHER
FINANCIAL
ASSETS
CASH AND
CASH
EQUIVALENTS NET DEBT
Carrying value, at 1 January –2,672 –198 –104 195 53 626 –2,100
Change in net debt, cash:
Proceeds from non-current debt –1 – – – – – –1
Payments of non-current debt 533 7 – – – – 540
Change in current liabilities – – 77 – – – 77
Net cash flows from derivatives – – – 22 – – 22
Change in other financial assets in
operating cash flow – – – – 13 – 13
Change in other financial assets in
investing cash flow – – – – 2 – 2
Change in cash and cash equivalents – 367 367
532 7 77 22 15 367 1,020
Change in net debt, non-cash:
Fair value gains and losses 55 – – –105 – – –50
Exchange gains and losses 11 – 1 – – –1 11
Effective interest rate adjustment –8 – – – – – –8
Other non-cash changes – –4 – – – – –4
58 –4 1 –105 – –1 –51
Carrying value, at 31 December –2,082 –195 –26 112 68 992 –1,131
Change in net debt 2016
FIXED RATE PERIOD
INTEREST
RATE, % CURRENCY
NOMINAL
VALUE ISSUED,
MILLION
CARRYING
VALUE 2016
EURm
CARRYING
VALUE 2015
EURm
1997–2027 7.450 USD 375 471 470
2000–2016 3.550 JPY 10,000 – 95
2002–2017 6.625 GBP 250 293 355
2003–2018 5.500 USD 250 246 245
Value, at 31 December 1,010 1,165
Current portion 292 –
Non-current portion 718 1,165
Bonds
Net debt is defined as the total of current and non-current debt less
cash and cash equivalents and interest-bearing current and non-
current assets. Net debt totalled EUR 1,131 million at the end of 2016
(2,100 million). Following the strong cash flow during 2016, the group
was able to reduce net debt by EUR 969 million.