UPM Annual Report 2016

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UPM Annual Report 2016 UPM Annual Report 2016 32 33
In brief Strategy Stakeholders Governance Accounts
CONTENTS
Businesses
UPM Specialty Papers
Growth focus
on attractive
segments
OUR DIRECTION
• In labelling materials, growth to maintain global
leadership positioning through competitive production
and strengthened partnerships with customers
• In office papers, growth as one of the largest office
paper suppliers in Asia
• Widen product offering in specialities and through new
product development, seek opportunities in existing and
new end-uses
OUR STRENGTHS
• Strong market position, competitive products
and world class assets
• Extensive experience in high quality release liners
and face papers
• Office papers in Asia Pacific with extensive distribution
network and strong brands in China
• Reliable supplier with exceptional customer service
globally
• Recognised industry leader in sustainability
and environmental excellence
GROWTH DRIVERS
Labelling materials
• Private consumption
• Aging population
• Urban lifestyle
• Higher standard of living
• Shift away from rigid packaging to flexible packaging
• Growth in automated product and logistics labelling
• Development of fastening systems
Office papers
• Economic growth
• Increased business services
• Urbanisation
• Establishment of new enterprises
Strengthened positioning
UPM Specialty Papers has a solid foothold in Europe with its label and
packaging materials. The new specialty paper machine at UPMChangshu,
China has strengthened UPM’s labelling materials positioning in the Asia-
Pacific region. In the Americas, UPM Specialty Papers is establishing a
stronger local presence by reinforcing its sales force.
Fine papers are an integral part of the business in Asia. UPM Specialty
Papers is one of the largest office paper suppliers in the Asia Pacific region. The
new specialty paper machine in Changshu enables additional growth in high-
quality office papers, a segment in which UPMhas been restricted by capacity.
Regular commercial production started in 2016 at the new production line
in Changshu. The investment further strengthens UPM Specialty Papers’
unique position on the Asian market.
Strong profitability improvement
UPM Specialty Papers’ profitability improved significantly, mainly due to
lower costs and higher delivery volumes, more than offsetting a less favourable
sales mix and lower paper prices. Compared to the previous year, net change in
currencies, including hedges, had a positive impact on profitability. Production
ramp-up of the new production line had yet a minor impact on profitability in
2016.
Accelerating growth in value-added products
The new production line in Changshu accelerates growth through shorter lead
times, improved local cost efficiency and enhanced global market coverage of
labelling materials.
The new line provides an excellent platform for strengthening partnerships
with customers through improved capability to provide a full range of services
and new products in Asia Pacific. The line will also improve the mill’s energy
efficiency.
The new production line is capable of producing a wide range of products.
In 2016, production of labelling materials increased gradually. The plan for the
UPMChangshu mill site is to develop the more value-added specialty product
segments, meanwhile allowing more selective approach in slow growth
segments where competition is intense. Production and product portfolio
optimisation is expected to support profitability over time.
The new production line will also improve production flexibility for the
European and North American markets.
Product safety strengthened
Product safety is a key requirement for the customers. UPM is committed to
only sourcing rawmaterials from suppliers who demonstrate high standards
of responsibility. UPMhas been using its own Restricted Chemical Substance
List which our suppliers must adhere to and thereby guarantees that none of
the substances specified are used in the production processes.
UPMpaper is safe to use throughout its entire product lifecycle, allowing
direct contact of dry and non-fatty food with papers granted a food contact
certificate.
UPMpapers are produced to high environmental standards from raw
material, which is responsibly sourced using sustainable forest management
practices. All products are recyclable.
• Capital intensive process industry
• Engaged high performing people
• Community engagement
• Responsible sourcing
• Chemical pulp with full traceability CAPITALS
• Label stock manufacturers,
commercial siliconisers
• Converters
• Merchants and distributors
• Printers and publishers
CUSTOMERS
• Safe and certified products
• Work safety
• Employment and career
opportunities
• High ethics and compliance
with global norms
• Recyclable products
• Low emissions
• ROCE
• Growth
OUTCOMES
SOCIAL
IMPACT
ENVIRONMENTAL
IMPACT
ECONOMIC
IMPACT
EXCELLENT SAFETY RESULTS
UPM Changshu’s lost-time accident frequency was 0.4
last year. The year was also exceptionally good for the
Jämsä River and Tervasaari mills, which managed to
halve all industrial accidents compared to the previous
year.
Work safety culture has been continuously developed
in Finland and China. At UPM Changshu mill, a safety
committee leads all safety practices. Working groups
have been established under the safety committee
to think about how the safety plans are implemented
in practice.
The managers share the best practices with the
whole mill during safety talks. All meetings start with
discussions about safety issues, and the mill’s own
weekly newsletter covers safety on a regular basis.
UPM Tervasaari mill manufactures the same
labelling materials as UPM Changshu, and the mills
have carried out a working culture exchange and
cross-auditing. The collaboration has been productive
and fruitful and the personnel’s feedback excellent.
Read more:
UPM Paper Asia was renamed as UPM Specialty Papers as of 1 October 2016.
UPM SPECIALTY PAPERS
VALUE CREATED
Cost-efficient production
Reliable supplier
Recognised leader in sustainability
Extensive experience and insight in labelling materials
Global market leader in labelling materials
Leading office paper brands in China
Extensive sales network in Asia Pacific
KEY FIGURES 2016 2015
Sales, EURm 1,273 1,168
Comparable EBIT, EURm 123 55
Capital employed (average), EURm 1,012 1,012
Comparable ROCE, % 12.1 5.4
Personnel on 31 Dec. 1,984 1,738