PERFORMANCE AND VALUE CREATION. Tapio Korpeinen CFO

Transcription

1 PERFORMANCE AND VALUE CREATION Tapio Korpeinen CFO

2 Group financial performance % of sales EBIT* ) % ROE* ) EURm Operating cash flow Net debt and gearing EURm % Min target Gearing Net Debt 15 * ) comparable figures for 215 and 214, excluding special items for earlier years 2

3 Drivers for the improved financial performance Business actions Commercial strategies Operational system efficiency Focused growth investments Efficient use of assets, including restructuring Group-wide initiatives implemented in businesses Variable cost reduction measures SmartSpend Maintenance and site management SmartMaint, SmartSite Working capital management SmartCash 3

4 Consistent improvement Productivity Capital turnover Fixed costs Variable costs Sales / employee Sales / CE Fixed cost / sales Variable cost / sales 1, EUR % % ,8,83,9,87,9,92,96 21,9 21,4 21,7 21,3 21,1 2,9 2,8 64,1 65, 66,2 67,1 66,1 65,4 64, LTM LTM LTM LTM Commercial strategies Efficient use of assets Focused investments Capital allocation Focused investments Efficient use of assets WOC management Commercial strategies Efficient use of assets Restructuring Maintenance Variable cost measures Materials efficiency Energy efficiency Efficient use of assets 4

5 FOCUSED GROWTH INVESTMENTS Delivering earnings and volume growth

6 Current focused growth investments targeting to exceed EUR 2m in additional EBITDA Fully contributing in H1 216 Pietarsaari pulp mill expansion Fray Bentos pulp mill expansion Kymi pulp mill expansion Raflatac expansion in APAC, Poland Ramp-up progressing well Lappeenranta biorefinery Changshu speciality papers Under construction, in schedule and budget Otepää plywood mill expansion Kaukas pulp mill efficiency Kymi pulp mill expansion 6

7 Focused investments are delivering growth Sales 215 Average delivery growth 211 LTM Q % 8 % 6 % 4 % 2 % % UPM Biorefining UPM Raflatac UPM Paper Asia UPM Plywood Pulp CAGR +2% Biofuels New business Standard products CAGR +4% Films and specials CAGR +7% Label materials CAGR +4% Cut-size CAGR +6% Plywood CAGR +3% 7

8 BUSINESS PERFORMANCE Targeting top performance

9 Comparable EBIT by business area EURm 15 UPM Biorefining % of sales 25 EURm 8 UPM Energy % of sales 6 EURm 5 UPM Raflatac % of sales Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 EURm 5 UPM Paper Asia EURm UPM Paper ENA % of sales EURm UPM Plywood % of sales % of sales 12, , ,5 5 4 Q1 14 Q3 14 Q1 15 Q3 15 Q Q1 14 Q3 14 Q1 15 Q3 15 Q Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 9

10 Business area returns and targets UPM Energy UPM Biorefining UPM Paper Asia UPM Paper ENA UPM Plywood UPM Raflatac 22 2 ROCE % * ) 22 2 ROCE % 22 2 ROCE % 22 2 CF/CE % 22 2 ROCE % 22 2 ROCE % Each business targets top relative performance in their respective markets * ) shareholdings in UPM Energy valued at fair value Long-term return target 1

11 Robust cash flow, with all businesses generating free cash flow Average annual operating cash flow and capex in 213 H1 216 EURm Biorefining Energy Raflatac Paper Asia Paper ENA Plywood Operating cash flow Investing activities Depreciation 11

12 DISCIPLINED CAPITAL ALLOCATION

13 Disciplined capital allocation Focused growth projects and attractive dividends financed from operating cash flow Consistently strong balance sheet Focused investments Top performance 14 Attractive dividend Strong cash flow Industry-leading balance sheet

14 Shareholder returns EUR 3,5 Operating CF per share and payout % 45 EUR 1, Dividend and dividend yield % 1,8 8 3, 4,6, ,5 2, 35 3,2, Dividend, EUR Effective dividend yield, % 2 1,5 1,,5, LTM Q216 Operating CF Payout as % of Operating CF EUR Share price and TSR Share price Share price, dividends reinvested 14

15 Continuous free cash flow generation opens value creation options EURm Illustrative: LTM operating cash flow EUR 1,528m Robust cash flow Operating cash flow in 214 LTM EUR 1.2bn 1.5bn Capital allocation Ordinary dividend 3 4% of operating cash flow Low operational capex needs Focused growth investments Additional capital generation EUR 4 65m per annum 15

16 Cash flow, balance sheet open value creation options UPM aims to maintain an investment grade profile Net debt EURm Net debt / EBITDA (trailing 12 months) Net debt EURm Gearing % 4 3, , Net debt / EBITDA 3 2, 3 4 Gearing 2 5 1, , 2 2 Net debt Net debt 1 5, , Q2/ Q2/16 LTM LTM 16

17 RESPONSIBILITY IS GOOD BUSINESS Risk mitigation Competitive advantage Value creation

18 Responsibility is good business Creating value through products and innovation Creating competitive advantage and long-term value by efficiency "We believe that customers, investors and other stakeholders value responsible operations that keep risks under control and add to our business opportunities, thereby increasing the company value. Risk mitigation by responsible value chain and production UPM Annual Report

19 Risk mitigation by responsible value chain Raw material spend qualified against UPM Supplier Code 92% Share of certified wood 84% 19

20 Risk mitigation by responsible production 1% production units with ISO 141 or EMAS 7% Management System in environmental deviations at pulp and paper mills in three years 2

21 Creating competitive advantage and long-term value by engagement Per million hours Safety Index Employee engagement EUR million Productivity 25 9, Lost-time accident frequency 8 7 Manager effectiveness,55,5,45 Sales per employee Employee engagement,4,35 5 4,3,25 3,2 5-year change: 77% 5-year change: year CAGR: 5% 21

22 Creating competitive advantage and long-term value by efficiency Case: UPM Changshu mill in China Water 6% Per tonne of paper COD in effluent 75% Per tonne of paper water intake water discharge Energy SO 2 emission 3% Per tonne of paper 9% Per tonne of paper Waste to landfill 6% Per tonne of paper Certified fibre 85% In compared to 25 Source: UPM 22

23 Creating value through products and innovation 77% of UPM products with third party verified ecolabel UPM ProFi raw material for decking turning former waste into high-quality raw material 23

24 Creating value through products and innovation UPM BioVerno turning residue into high-quality renewable diesel 8% fossil CO2 emissions 24 1% wood-based material

25 Consistent long-term work receives external recognition UPM in sustainability indices Sustainable and Responsible (SRI) investors form a significant part of UPM s shareholders 3 SRI, % of total institutional shareholders UPM Industrials & Materials Europe Source: Nasdaq, October

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