UPM Annual Report 2016

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UPM Annual Report 2016 UPM Annual Report 2016 24 25
In brief Strategy Stakeholders Governance Accounts Businesses
EFFICIENCY AT A NEW LEVEL AT UPM KYMI
The investments made at the UPM Kymi pulp mill
improve the efficiency of the entire mill integrate:
the pulp and paper businesses can independently
optimise their production and simultaneously benefit
from mutual synergies related to energy, logistics
and environmental management.
The largest investments at the pulp mill have been
the new chemical recovery island introduced in 2008
and the investment in a new pulp drying machine,
debarking plant and the modernisation of the soft-
wood fibre line, which was completed in the autumn
of 2015. In the summer of 2016, UPM decided to
invest a further EUR 98 million in the pulp mill and
increase the annual production capacity to 870,000
tonnes by the end of 2017.
Previously, the pulp mill had to limit pulp production
when the paper machine was not running because
the mill did not have enough capacity for drying
all the pulp before baling it for export. Now pulp
production is no longer dependent on whether the
paper mill is running or not.
The investments will also improve the energy efficiency
of the integrated mill site. Despite the major increase
in the pulp mill’s production capacity, emissions into
the air and water will remain at the same level as
before.
CONTENTS
OUR DIRECTION
• In Pulp: Provide customers with direct access to the
most versatile pulp range and advanced technical
service. Maintain cost competitiveness through
continuous operational improvement. Grow as
a responsible and cost-efficient pulp supplier.
• In Biofuels: Provide unique wood-based advanced
biofuels in various markets and segments, achieve
top performance at UPM Lappeenranta Biorefinery,
evaluate opportunities for scaling up biofuels business.
• In Timber: Enhance profitability through efficient
use of wood supply, integrated full-production and
sharpened commercial strategy. New customer promise
“Grown to Sustain” will strengthen the competitive
advantages of UPM Timber on strategic markets.
OUR STRENGTHS
• Versatile range of sustainably produced pulp grades
suitable for a wide range of end-uses
• Modern, efficient mills and business committed to growth
• Responsibility integrated in all operations from wood
sourcing to logistics
• Established producer of advanced renewable diesel
• Competitive sawmills with skilled own global sales
network
• Synergistic supply chain of wood for sawn timber,
pulp and renewable diesel
GROWTH DRIVERS
Pulp and timber
• Private consumption in versatile end-uses
• Population growth, increasing income levels
• Urban lifestyle
• Demographic change
• Future constrains of white recycled fibre supply
Advanced biofuels
• Climate change
• Sustainability
• Low carbon mobility
• Pressure to reduce greenhouse gas emissions in transport
• Increasing the EU’s self-sufficiency in energy
Benefits from integrated production
In the UPMBiorefining business area, UPM combines integrated production
of pulp, timber and biofuels with a synergistic supply chain of wood raw
materials. Timber by-products are used as pulp rawmaterial. Pulp mills
produce renewable energy in their recovery boilers and provide CO2-neutral
biomass-based electricity. Crude tall oil, a residue of pulp production, is the
rawmaterial in UPM’s renewable BioVerno diesel.
Benefitting from focused investments in pulp
Over recent years, UPMhas made focused investments to expand production
and improve efficiency at all four pulp mills. Debottlenecking investments
continued in 2016. The UPMKaukas pulp mill investment was completed
in December. The investment strengthens the mill’s efficiency and
competitiveness.
In July, UPM announced a EUR 98 million investment in its Kymi pulp
mill in Finland, increasing the mill’s annual pulp production capacity by
170,000 tonnes to 870,000 tonnes by the end of 2017. This investment will
further improve UPMKymi’s cost competitiveness and environmental
performance.
UPM’s total pulp production capacity has grown by more than 500,000
tonnes since 2013 with investments of approximately EUR 350 million.
Simultaneously, production efficiency has improved at all mills thanks to
these growth investments. UPMhas also focused on strengthening employee
competencies and mill maintenance as well as environmental performance.
Performance buoyed by growth and improved efficiency
Thanks to increased capacity, UPMhas been able to respond to growing
demand from existing customers in tissue, specialty papers and packaging.
UPMpulp deliveries increased by 7% in 2016 compared to the previous year.
In combination with lower operating costs, the negative impact of UPM’s
lower pulp sales prices was partly offset.
As an integral part of the value chain, efforts to enhance wood supply
continued. Profitability in sawmill operations improved thanks to increased
delivery volumes and improved production efficiency but remained modest
due to stiff price competition.
The quality of the wood fibre impacts sourcing costs, production
efficiency and pulp quality. In 2016, benefits were gained in both fibre quality
and optimisation of harvesting and logistics costs.
UPMTimber is a significant operator in the high quality Nordic certified
sawn timber segment and a reliable supplier for the growing construction,
Benefitting from growth investments
UPM Biorefining
• Capital-intensive process industry
• Sustainable wood from certified sources
• State of the art production technology
• Community engagement
• Engaged high-performing people
• Reliable well-functioning supply chain
CAPITALS
Responsible and competitive sourcing
Modern and efficient integrated production
Reliable pulp and timber deliveries
Multi-fibre pulp product offering
World-class technical service close to customer
Best-in-class sustainability offering
UPM PULP AND TIMBER
VALUE CREATED
PULP
• Tissue, board, speciality and
graphic paper producers
TIMBER
• Furniture, joinery industries,
construction and packaging
CUSTOMERS
• Employment, work safety
• Community wellbeing
• Safe and sustainable
products
• Biodiversity
• Renewable energy
• Carbon storing products
• Low emissions
• ROCE
• Growth
OUTCOMES
ENVIRONMENTAL
IMPACT
ECONOMIC
IMPACT
SOCIAL
IMPACT
KEY FIGURES 2016 2015
Sales, EURm 2,206 2,272
Comparable EBIT, EURm 406 467
Capital employed (average), EURm 3,231 3,191
Comparable ROCE, % 12.6 14.6
Personnel on 31 Dec. 2,630 2,593