Download - UPM Strategy
Jussi Pesonen
President and CEO
31 May 2018
UPM Strategy
| © UPM – The Biofore Company
Responsible
operations and
value chainCircular economy
Sustainable and
safe solutions for global
consumer demand
High
performing
people
Sustainable
forestry
2020
2030
Innovation
We create value by seizing the limitless potential of bioeconomy
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| © UPM – The Biofore Company
Biomolecules
Fibres
Logs
Trees
Biofuels
Biochemicals
Pulp
Paper
Packaging
Tissue
Labelling materials
Biocomposites
Sawn timber
Plywood
Energy
3
New horizons in bioeconomy
| © UPM – The Biofore Company
| © UPM – The Biofore Company
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
Enterprise value and dividendEURm
Targeting superior shareholder returns
Cumulative dividend
Market capitalisation
Net debt
4
| © UPM – The Biofore Company
How to achieve the shareholder returns
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| © UPM – The Biofore Company
UPM strategic focus areas
> Continuous
improvement
We create value by seizing… …the limitless potential of bioeconomy
> Earnings growth > Growth and
competitiveness
> Continuous
improvement
Portfolio
> Develop businesses with strong long-term fundamentals and sustainable competitive advantage
Performance Growth Innovation Responsibility
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| © UPM – The Biofore Company7
Leading performanceCase Smart-programmes
Safety
75% improvement in LTA
SmartSpend
500 million in variable cost savings
SmartSite
7% cost reduction in site support operations
SmartFront
Commercial excellence
SmartMaint
50 million reduction in annual maintenance cost
SmartCash
400 million release from working capital
Note: LTA = lost time accident
Operational excellence
Commercial excellence
Impacts during the initial programme period
| © UPM – The Biofore Company8
Continuous measures to maintain and grow earnings
FOCUSED INVESTMENTS
13 14 15 16 17 18 19
100
75
50
25
0
Sales 2017
UPM Biorefining
UPM Raflatac
UPM Specialty Papers
UPM Plywood
UPM Communication Papers
UPM Energy
+70,000 t+100,000 t
+170,000 t
Label stockexpansion
+120m litres +360,000 t
Pulp mill efficiency
+40,000 m3
+170,000 t
Label stock expansion
Specialty labels expansion
+40,000 t
+30,000 t
-420,000 t
-160,000 t
-460,000 t
-345,000 t-195,000 t
-280,000 t -128,000 t
-305,000 t
Power plants
CLOSURES, CONVERSIONS AND DIVESTMENTS
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+40,000 t
+110,000 t
+45,000 m3
-200,000 t
Spearheads for growth
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Spearheads for growth
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High value fibre
Specialty packaging materials
Raflatac Specialty papers
Communication
papersEnergy
Biofuels Biochemicals
Molecular bioproducts
Plywood
PulpForests
Portfolio – our criteria for investing
1. Strong long-term fundamentals
2. Sustainable solutions
3. Competitive advantage and/or entry barriers
• Attractive returns and value creation,
short and long term
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| © UPM – The Biofore Company12
Spearheads for growth
High value
fibre
Specialty
packaging
materials
Molecular
bioproducts
1. Demand growth driven by global megatrends
2. Fibre-based products provide sustainable solutions
for global consumer demand
3. Competitive greenfield pulp operations have high
requirements (wood supply, location, infrastructure)
and long preparation time
1. Demand growth driven by global megatrends
2. Sustainable and safe solutions for global consumer
demand
3. Technically demanding, fast growing segments,
where UPM has strong position
1. Climate commitments and replacing fossil materials
open large growing markets
2. Unique solutions to decarbonise traffic and provide
consumers with sustainable products
3. Unique value chain position with sustainable
feedstocks, right technology and IPR
Our means to grow
• Focused growth projects to maintain and grow earnings
–Small to medium size
–Low risk, fast implementation, high returns
• Transformative projects for earnings transformation
–Larger size and/or larger impact on long-term position
–Careful preparation for successful implementation
–High standards for returns
• M&A as an option
–Alternative or complement to organic growth
–High standards for returns
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| © UPM – The Biofore Company14
UPM’s current focused growth projects
• Kaukas pulp mill expansion, +30kt in Q2 2018, Finland
• Raflatac speciality label expansion, in Q4 2018, Finland
• Chudovo plywood mill expansion, +45k m3 in Q3 2019, Russia
• Jämsänkoski release liner expansion, +40kt in Q4 2018, Finland
• Nordland PM2 conversion to release liner, +110kt in Q4 2019, Germany
• Changshu release liner expansion, +40kt in Q1 2020, China
| © UPM – The Biofore Company15
UPM’s current transformative prospects
• Possible new 2mt pulp mill, Uruguay
–Second preparation phase is proceeding.
The permitting processes for the mill,
rail and port, as well as rail tendering
have started as agreed.
• Molecular bioproducts, possible
biorefineries
–Basic engineering work regarding a
potential 150kt biochemicals refinery,
Germany
–Exploring next steps in biofuels,
environmental impact study for a potential
500kt biorefinery, Finland
Capital allocation
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| © UPM – The Biofore Company17
5-year cumulative cash flow (2013–2017)– disciplined capital allocation in action
Industry-leading
balance sheet
Net debt /EBITDA
~ 0x
EUR 6.4bn
Deleveraging
Strong operating cash flow
Attractive dividend
Focused investments
EUR 1.9bn
EUR 2.6bn
EUR 1.9bn
| © UPM – The Biofore Company18
Illustrative capital allocation*) for next 5 years,assuming the Uruguay pulp mill investment
Industry-leading
balance sheet
Net debt /EBITDA
< 2x
Attractive dividend
EUR ~3–4bnPerformance focus
Strong cash flow
High return
investments
EUR ~3–4bn
Maintain headroom
*) This is not a forecast
| © UPM – The Biofore Company19
Summary
UPM – The Biofore Company
Purpose
We create value by seizing the
limitless potential of bioeconomy.
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