UPM-Kymmene Oyj (HEL:UPM)

CMD 2020

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Sep 9, 2020

Welcome, everyone, to UPM's 2020 Capital Markets Day. My name is Mikamikola. I'm the head of add up in investor relations, at UPM, and I will be your host today. And my name is Kenneth Roman. I'm the group treasurer of UPM. Safety is top priority, at UPM, and that's why given the, situation in the world today, We have also decided to hold this event purely in virtual format. And for the same reason, we have also decided to combine our traditional banker's day with the Capital Markets Day. So I also want to wish all representatives for the UPM Banking Group welcome, and hope you will find the day, interesting and informing. Our agenda today will focus on 3 main topics. We will cover our spearheads for growth we will discuss sustainability as a value driver for our businesses, and then we will also discuss actions to ensure performance at UPM. Let's take a look at our agenda As you saw from the agenda, we have 2 Q and A sessions during the day. The first one covers our growth businesses and the spearheads for growth. And the second Q and A at the end of the event will cover UPM strategy, sustainability, and performance. And please note that you can write your questions at any time during the event. So, so when you, you have a question to ask, just write it, under, the video screen in the webcast platform, write your name and then your question, and it will be notified. So you you can, you can write your questions, throughout the event. But now I would like to kick off the event, and, and invite Youssef Peso and our CEO to, to talk about UPM strategy. Ladies and gentlemen, it is my great pleasure and, and to to actually warm, warmly welcome you to this event. We do have 3 hours time to discuss, where UPM is heading, what is our strategy, what is our current performance, how do we actually see the future. Hopefully, this will trigger a lot of questions, which, like Mikaela, just a few minutes ago, was presenting that we will have a kind of opportunity for 40 minutes to discuss about and answer questions as well. But the more so, what I want you to be convinced is the future of UPM, where we are heading what is the future of UPM and how UPM is a good investment. UPM is currently having a very unique position in this industry. We have truly transformative growth projects ongoing full speed ahead, both in, Uruguay and in in Germany. And these projects will have a significant impact into our earnings or returns, but even more so, they will position UPM to the future, differently than what we have been, what we are today. And therefore, it is quite interesting to talk about these things. Most of our businesses are having very good long term fundamentals when it concerns demand, but also profit pool outlook for the business. Even the COVID 19, the corona has not changed that view. In many cases, it have it has strengthened our position. In fact, sustainability climate change are strengthening during these times, and therefore, I think that UPM is well positioned for that. UPM's transformation has entered the new era. We are now turning the page. You know, our chapter 1 I will come back to that. It's now done. We are moving to chapter number 2. This is absolutely exciting moment of, of having you here to discuss about the future of UPM. UPM's portfolio is, following. We do have sustainable solutions to offer in various product areas. It is materials that are sustainable fiber products. Very interesting molecular bioproducts, which is, growing fast now and obviously with our Loyna investment they are growing even faster, in the coming years. Good products, I. E. Our timber and plywood businesses are forming very solid good foundation for today and for tomorrow, and then low emission energy as UPM is having a lot of, hydro and nuclear power. This picture is, sowing the system where we are, where we are in. We obviously use renewable recyclable materials. And low emission energy, then the system, the operating model of the UPM is actually the core of the activity. For the future. But then it offers. It opens, a lot of opportunities during, if we think about the businesses where we we are participating, first of all, the one being tissue hygiene heightened type of end uses, communication, packaging, bioplastics, textiles, biochemicals, even biomedical. Where we have, just recently launched a new commercial product called Fiptex. But then traffic transportation, construction, and electrification. So UPM is having a very wide opportunities. To actually participate in sustainable renewable materials businesses. But foremost, our kind of number one priority is shareholder return. It is, superior shareholder return to add value to the company. And, This is a great picture of where where we are today. UBS market, market cap is today, 13,900,000,000 And this is the history of, 2008 to 2020 second quarter. And as you can see that, you know, all what we do has improved our value of the company. And I hope that what we will present today And, I know that all of that, those projects that we are running through, will improve our, competitiveness, will improve our, earnings and returns. And, and that does, you know, the value of the company should, target to higher than even today. This picture is quite illustrative where we are, where we are heading and where we are coming from, in the In the middle, you see words of operating model, performance balance sheet, focused growth, and innovation, is sowing what we have been doing in the transformation phase 1. Operating model was renewed in 2 phases 2008. And, in 2013. And today, 6 businesses, global functions is operating smoothly with high efficiencies and synergies internal of the company. Performance performance performance has been the culture of UPM during the last 10 years or even more than 10 years and still exists. This is something that we, we believe in and, and therefore, it is actually enabling us to perform in the future as well. Balance sheet is enabler as well that, you know, with this strong balance sheet, UPM is able, really able to run through these, big projects. We are having a investment portfolio or close to $3,000,000,000. But then focused growth investment and innovation are such a things that we have been, developing over the last 10 years. And, and last year, 2019 was the year when we started to make big decisions, I. E, the the Uruguay pump, mil decision and then followed by by this, biochemicals investment, final investment decisions, and more to come. On the right hand side, you see the 16 percent EBIT margin for the 60 percent of the business, which is 19 to 2019. And then, our communication paper is is still, 40% of the business being on the on the average 5 year average, yielding a 5%, EBIT margin. I will come back to this slide, you know, in, in the end of the presentation, and, and you will see where we are. UPM strategy is pretty clear and and and, what we do, and this has not changed. We, of course, create value by seizing the limitless potential of the bio materials, I. E. The forest biomass. And then key cornerstones of the of the success is performance, earnings growth, responsibility, and innovation. Everything that we do, of course, is, strongly, relying on long term, demand fundamentals. That, you know, demand outlook is solid for the many of our businesses. And then one topic that, we have been repeatingly, putting into our decision making process is, entry barrier. This is the reason why UPM is today making up making applications for the patents, pay paid applications more than 3300 a year. To protect also the future of UPM earnings ball. Next slide is all about driving for long term value creation, mitigating the climate change. Why this industry is so good at this one? This picture is actually telling the story. Many of the industries are having only one actually opportunity to participate on climate, climate change and, and trying to improve the emissions, and it is in the middle, the direct emissions of the production. But in this industry and especially in UPM, where we have a lot of forest land ourselves, and and then we have a lot of innovation to new products. We act through forestry. We act through emissions, and we act through the new products. So we do have 3 sources of over opportunities to, take opportunity and and build new businesses. And this is the reason why we have, committed to UN business ambition for 1.5c. It is the future, and we are in the middle of the of the possibilities of going forward. But coming back to the facts, the portfolio what are the criterias for investing? Of course, you know, the sustainable and and safe solutions are combined with strong long term fundamentals for demand. No doubt. And then high entry barrier, which is, which is UPM competitive advantage. It could be raw materials. It could be patents, you know, technology, or it could be even market position or then then how we run the business. So there's a plentiful barriers that we are building on our future. And obviously, last but not at least at all, it is a strict return requirements for everything that we do. Ladies and gentlemen, UPM spearhead of growth is based on this peak which I think that we have been repeating now two and a half years since we last time met in here in the Capital Markets Day 2 years ago, we we launched this. At that time, this was a direction where we are heading. There were no single decision made at that point of time. And now we have quite many decisions that we have been taken. Starting from the right hand side, the molecular bio products Biofuels business and Biochemicals business where, obviously, La Veranta is already operating in biofuels. Yuki Oahuasca, our head of technology. We'll talk about biofuels and biochemicals later today. And then biochemicals the law in our investment that we made the decision, only, 7, 8 months ago. In the middle, obviously, the Uruguay pulp Mill project is is a key core of the of the growth in in that and in label papers and, label materials, which is our specialty packaging, materials. Businesses, we have made a, a conversion of 1 of the paper machines in Northland to produce, specialty papers supporting the value chain of the packaging rates and, and labeling business. But also that we have been We have been improving increasing our, product portfolio in in our Raflatac business. Also, we have built a new facility in Poland, recent in recent years. These are the spearhead of growth, but on the on the base, we have the all the enablers. Communication paper is core key core of UPMs success today and success tomorrow, enabling us to have a a strong balance sheet enabling us to invest there in the high growth areas. Plywood, leading leading company in in the top category, plywood's, UPM is is definitely having a very solid solid position, even if the business is smaller than many others. And in the energy, hydro based nuclear bio based, very efficient energy is key, key, basement, and, and key business for UPM. Ladies and gentlemen only short summary of these projects where there will be more deep dive later today. I would only highlight that Uruguay is now moving as planned. We have been able to really proceed with the with the full speed ahead ahead on all of what we have been planning. And I would like to only highlight the cash cost level. I have been talking to many of you and always stated 280. And 280 was a important figure for me during the last 10 years to achieve the one of the lowest gas cost, pulp mill in in this world. So that was a kind of long development of plantations, technology, and, and of course, you know, the transportation. Value chain to the mill. But this is what, what it is all about. We will hear that later today. Then next generation biochemicals where UPM is making a very unique, unique, project, today, giving a value for our customers from high performance on unmatched sustainability, typically replacing gas, oil, and, and coal with, recyclable renewable materials. Cost position is, is, is good. And I promise you the high barrier of entry is is protected with, with a lot of patents and the technology. UPM is combining forest biomass to a chemical business where typical use of raw materials is fossil. Today, these are on built phase. I mean, the Uruguay and and the and the biochemicals business in in Germany, but we are also developing. The UPM is planning, of next generation biorefinery, which will actually have a very unique feedstock value chain. Technology concept will be more than what we have in Lappeenranta. And then high quality carbon neutral fuel, and NAFTA will be the product out of the out of the mill. What happens next, is following? We are preparing for the basic engineering now. Phase, and that final decision for basic engineering will happen in new future. When we have then made the decision of the basic engineering, it means that the basic engineering will last more or less 12 months or more. To prepare ourselves for final investment decision. So within 1 year, the the window of making the decision, final investment decision opens in opens in that, that time frame. During this basic engineering, we will finalize the location for the mill currently we have, a, where we have been building the kind of business case has been in Finland, but obviously, like in biochemicals, when we are entering to, basic engineering, that will reopen the location discussion and, and that will then during that period of time, will be then finally decided whether it is in Finland or somewhere in Europe. Communication Papers, UPM is very committed to communication papers, We do have a very strong track record over how we perform, how we actually run the business. We have a very clear strategy which has been, in place for several years. Leading capabilities, whether they are human capabilities or coming from the assets itself and then sizable market. Market is still in Europe 20 1000 20,201,000,000 tons and, globally more than 70,000,000 tons. It is the cost game. It is competitiveness came and, therefore, we take actions when when it needs to be taken. Ladies and gentlemen, our focus areas are following ensuring performance and then, transformative growth projects. These two things are focused in UPM. It is run, build, and develop. So we have 2 facilities under build, which is, once again, repeating Uruguay and and Germany, and then this biorefinery is on the development phase. Run efficiently, build efficiently, and develop actually, the concept for the future. And then back to the slide number 203, where I was explaining the fundamentals that transformation phase number 1, which was, operating model performance, balance sheet, focused growth, and innovation. UPM has been very diligent on on operating in all of these three areas. And what will be the future looking like? You know, spearhead of growth, investments will be, when in full run, bringing more than 2,000,000,000 of sales, to UPM and, like, as as stated here, EBIT margin will be as as illustration more or less 20% or more. And and once again, the future sales will be most probably we are having a declining market, which is our paper business, But on the other hand, we are building new future with the high profitability, and growing businesses. So UPM is in unique position to really perform and deliver and and and be a great partner to investors, to our own people, to society, to add value, sustainable and responsible company. With these words, I stop here and we move on. Thank you, Youssef. I'm sure you have plenty of questions following this. So please remember you can, throughout the day, write your questions in, in the under the video screen, in your, webcast platform, and we will return to this, more strategic group level questions, at the end of the day in the second Q and A session. But now We will move on. Gary Stallberry, will come and talk about sustainability as a value driver for UPM And, before letting, carry loose, we will start from the forest. Forest are dear to many. They're a whole, a wild and vital mysterious source of well-being, and recreation, stories, spirituality, and inspiration. For us are far more than a resource, and that is a fact. But this creates attention that we feel in our ever day reality. This is us, earth and humanity, and an inseparable symbiosis. Changing color is a simulation of the continuous ebb and flow of CO2. The planet is breathing It's a beautiful thing. It's all inspiring, but it's out of balance. We, humans have been living on CO2 credit for far too long. We are releasing greenhouse gases in quantities that the planet just simply cannot breathe in. Situation is down and we cannot wish it away. This is sustainable business. And yes, we know that this isn't how it's usually presented, but this is actually how it is. The be no future beyond fossils without sustainable forestry. We grew the forest to cut it. And we cut it, but we grew it again and again to develop all kinds of renewable products and the innovations that humanity needs to steer a course to avoid climate catastrophe. To do this better, we need climate positive forestry. This is something that we are committed to, and we challenge the rest of the industry to do the same. So whether we like it not. This is what hope looks like. And this and this and this. Hello. Next, we will talk about the sustainability as a driver for value for our business and, for UPM as a whole. We talk about trends that you see on the picture and how they drive opportunities and value creation for UPM as a whole. What we believe is that this renewable based raw materials, our efficient production platform, and, the recyclable products that we produce will benefit UPM through increased demand in our products and offerings, the premium pricing that we will be able to gain because of our sustainability. The improved competitiveness that our efficient operations will gain as the world moves on in the sustainability topics, but also with our unique access to the raw material base that we traditionally already have had for a long time is a really good raw material. It's available in large quantities in many places of the world And in this cycle, it does not contribute to the increase in the CO2, content in that atmosphere as the fossil resources used through the extraction. As we grow food and forest, that will tie in carbon dioxide from the atmosphere. It will store part of that, permanently underground. And as in the video, it will renew itself after it's utilized. This is very, very different from the fossil based, raw material cycles where after extraction CO2 will go into the atmosphere and cause further climate change and, warming, because of that. We believe that the biomass based businesses will offer a sustainable alternative in the long term for the fossil based industries. As the society's and people tackle the challenge of climate change, especially in Europe, but also in other parts of the developed world. We we will experience a lot of chains. However, these chains cannot take place with sacrificing economic growth or impacting, the progress in the well-being of people We need to have that as well. The renewable products, redeemable raw material based product and recyclable products are actually an answer to much of this challenge. During the last years, we have worked, through the different scenarios in terms of climate change, and warming. We have assessed the risks and opportunities that arise in these different scenarios. With this continuing climate change, increasing emissions, and the consequent, high warming, will have an impact to many, operations and businesses. For UPM, the principle effects are through climatological changes, where, for example, in the northern hemisphere, our forest and the forest in the Nordic area will grow more. There will be some, negative impact from, biological events or changes, for example, through pests, but the net impact will be positive. In our operating areas in the southern hemisphere, the presipitation patterns will change and the, temperatures will change. In Uruguay that will mean improved growth in our plantations especially in Uruguay. And that is different from many other places, for example, in Latin America, or Southeast Asia, where the climate change actually would be negative, effect to the plantation based activities. We have also assessed methodological risks, but, in the locations where we are based there is actually a low level of risk change in that respect. In the other side, in this low carbon transition scenario with the consequent lower warming, we believe that the businesses of UPM with our renewable based raw materials and the efficiency of our businesses and the change in consumer behavior will actually benefit in terms of the top line, many, if not all, of our businesses. Because of this, skin area work earlier this year in January, we decided to commit into UN's business ambition for low 1a half Celsius degree warming scenario. As stated earlier, we believe that we are uniquely positioned to act through our climate positive for history. We know exactly what we can, and we'll do in terms of the scope 12 emission reduction to achieve the 65 percent emission reduction, but also we know that we will have a lot of opportunities in terms of, sustainable and climate friendly products, for many of our businesses. 1st forests. So sustainably and commercially managed forests. Will, create and sustain a renewable raw material base for our industrial operations. At the same time, they will also act as a significant carbon sink to help mitigate the climate change challenge. In Finland, we already have seen that, during the last cycle or 60 years, the productivity of the forest in Finland have increased by more than 100% from 50 to more than 100,000,000 cubic meters a year. This has been, enabled by the commercial management of the forestry here in Finland. Another good example is what has happened in Uruguay during the last 30 years. So from the nineties, the plantation base in Uruguay has increased from nothing to approximately 1,000,000 hectares. And that all of that has been achieved by turning former plantation, former, grassland and and pastures to to plantation in an economically and environmentally sustainable way. And this has enabled us to create a significant raw material base in Uruguay. So we think that the commercial use of, forestry and wood. It's a way to create a carbon sink and to create the carbon storage that helps mitigate the climate change. Also, we know that the forestry and especially the plantation based forestry is actually the cheapest way for carbon sequestration also as a business or as a business opportunity. We think it it is it is a, it is an efficient and useful tool in case the societies wish to tackle the challenge of climate change. And and and that business opportunity can take place for UPM either in terms of a private market or, through changes in the public or regulated marketplace for carbon sequestration Also, commercial use of the four s three is not in conflict with other goals. Like, for example, goal to increase the biodiversity in our forest land and plantations. We actually, launched a Revolving credit facility earlier this year, where the pricing of that financial product is tied into improvement in biodiversity, and also, progress in our, emission reduction development towards that 65% target. In terms of the emissions, we know exactly what we need to do to, reduce the sculpt 12 or manufacturing and purchased electricity emissions by 65% up to year 2030. Part of that will be, investments, but they will also, benefit economically the operations through efficiency increases. We will also have the tools and the pathway for 30% reduction in our scope, 3 or, logistics and supply chain ambitions by 30% to 2030. In terms of products, the sustainability actually drives business opportunities and growth opportunities for UPM. Many of the products that we today produce and market also on the basis of the sustainability merits will actually attract premium pricing. That is driven by the consumer goods, commercial strategies by our customers or their customers. Also, we think, and we know and have, experience in certain segments that are opened up, because of the sustainability. And in many of these new markets, we can see that, existing incumbents based on fossil fuels and fossil fuel based raw materials, they find it difficult to enter into that new market segment and that creates a barrier for entry for them and a competitive advantage for us. In our specialty packaging value chain, we differentiate also through recyclability of our products and also recycling of those products as a service offering. And, and this recyclability and recycling actually also creates often in this means a competitive advantage to UPM. So the sustainability, we think it drives commercial opportunities for UPM. We believe it drives investment opportunities for UPM. And companies like UPM, which are based on renewable raw materials, efficient production, and the high quality sustainable products will benefit and have room to invest perform profitability and grow because also of the merits in the sustainability. Thank you. Now we will take a a short break. So so that everybody can can take a take a short break, to get some refreshments or stretch your legs and then we will come back and continue with our spearheads for growth. Please remember Please remember that you can always write your questions, to the, to the platform so so that, they will be notified for the Q and A sessions. Later today. So we will be back in in 5 minutes. Thank you. Welcome back to UPM Capital Max Day 2020. Now we are starting session covering UPM's, spearheads for growth. Before the break in the sustainability presentation, Karistolberry already touched upon, the bio mo molecular bioproducts businesses role as a sustainable solution, but also as a very promising business opportunity for UPM. And we will start on these topics. So Yurki Obazka will now discuss UPM Biofuels And UPM Bio Chemicals. The UPM Lock Beltran BioRefinery has been ranked world number 1 several times. It is the 1st commercial facility to produce wood based advanced biofuels and raw materials for plastics. They replace fossil based materials in transport fuels, packaging, and construction materials. Our biorefinery remains unique in the world today. We started commercial production in Lappeenranta and Finland in January 2015 and reached breakeven in profitability by the end of 2015. Today, it produces 160,000,000 liters of advanced biofuels and bio materials each year. Yeah. Reducing annual greenhouse submissions equivalent to roughly 150,000 cars, genuinely decreasing emissions and mitigating climate change. Our clients can reduce their carbon footprint by replacing fossil based raw materials with low emission products. The greenhouse gas emissions of UPM Biovernal diesel are over 80% lower than those of fossil based diesel fuel. When used to produce plastics, one ton of UPM Biovernon after saves about 3 tons of CO 2 emissions compared to fossil base raw materials. The UPM Lappeenranta Bio Refinery has played a key role in UPM's BioForce strategy, to integrate the bio and forest industries. Years of investments in technology and product development have really paid off and advanced biofuels continue to play important role in UPM's ambition to go beyond fossils by offering sustainable alternatives. So ladies and gentlemen, hello from from my side as well. Driving cleaner traffic. Is the tagline for UPM biofuels business. And we believe as, as the video also showed that that's a, that's a very good, success case, so far, and it looks very promising for the future. We're also giving you some numbers not only the traditional capacity, but also greenhouse gas emission reductions 80% down, but also financials, as a one timer. For last year so that, you know, as we are aiming to grow in this business area so that you know more, what kind of profitability we have been able to achieve. 20% EBIT margin return on capital employed at 26% last year. Now, we have ambitions for for growth, and let's start, from the markets, you know, in in how they how do they look like going forward. So on the left hand side, you can see how, let's say traffic related or transport related CO2 emissions have evolved over the decades. It's been a pretty steep curve. These emissions constitute roughly, 25% of global CO2 emissions. So transport sector is responsible for roughly 4, 1 fourth of global emissions in that respect. And it's mainly driven by road transport, so far. And, when we are, aiming actually to tackle the global warming. The transport sector has to play ball. They have to also participate in decarbonization efforts. And, I put it here the below 2%, warming, warming curve on the right hand side. And this shows, what kind of a tall order the CO2 reduction, in, in the transport sector is going to be. So it means in practice that, you know, the global transport emissions need come down to the level where they were sometime in the seventies in order to stop the global warming. From that part. And we believe at UPM that, we need all types of actions as we did already 2 years ago in the last capital, capital markets day, but also now it's, it's the same. We need, engine improvements going forward in petrol engines. We need as much EVs in electrical, electric vehicles as possible, but there's plenty of room at least for several decades still for all types of renewables, fuels, especially a renewable liquid fuels, but also, green hydrogen and, and maybe synthetic fuels as well. And on the right hand side, you can see how, how that, you know, relates then into, how this challenge is related to different sectors. And even if the passenger vehicles would be turned EVs, by the mid-30s, we still have a lot to do in the commercial vehicle, sector and in, in aviation, where we do not believe that actually, electrification will solve the issue in, in a short to medium term, maybe long term, then there might be possibilities. Now this similar challenge, if we look at, you know, then, think about, the, the regulated, markets of of fuels. Here, you can see how the, how regulation and mandates have been growing. So they have, they have been growing, of course, because the challenge is is, is a big one. So on the other hand, you know, it's, and it's also growing in line with the, with the global capacities, especially from HVO, capacities because, the 1st generation biofuel production is hitting a blend wall. As we know, as consumers of of gasoline, we know 5%, 10% limits. And in, and in diesel, it is 7% levels. So that will hit a limit. And on the other hand, I mind you, also, 1st generation biofuel generation is generating quite a lot of CO2 as well. So, we feel that especially advanced, renewable fuels are is, is one of the, major solution for this, transport decarbonization sector in in the, in years to come. Now let's then move on to the UPM concept of, how do how are we developing the next generation by a refinery, because we don't want it to be a copy of a, of a typical HBO plant. Which is based on, on liquid market, raw materials only. And we also, we don't want that it will be a copy of Lappeenranta Bio Refinery. So we are developing, once again, something, leading edge, concept, which is aiming for maximum, greenhouse gas reduction because in this business, that can be directly related and, and, and, and, and, convert it into, into the selling price and the profitability of the business. So we are looking at, also, new sustainable biomass as, as, part of our feedstock which will then also help, widen the raw material base and have access to the to the future growth of our business, but it also ensures that we have, excellent CO2 reduction. We talk about even climate positive fuels in that sense, and I'll I'll come back that in, in a moment. What do we mean by, by those but, you know, also designing a plant like this need to be taken into account that we can, we can use all the side streams as effectively as possible, for the, to maximize the output and not especially profitability. And it's also, if we do this, then we will be also able to select the markets where we operate. Be there in, in, in passenger traffic aviation or in, enough that derived, for instance, biochemicals or plastics. A little bit more about this, feedstock, poor. So we are aiming at more than half of the feed stock of the new plant, which you can see is about four times, five times larger than, then the La Pena and the biorefinery, more than half of the feedstock should be UPM integrated feedstocks. So where we have, so we are more up, upstream, integrated, we can have where we, which we can also manage, to, to our benefit residues, saw, saw, saw dust and also bark could be utilized. And then carbon farming, through our massacre carinata crops, which I will also briefly touch upon in a moment. There will be, of course, flexibility with some, market based waste feedstocks which which are there, but we, a, not to utilize palm oil in in in the mix. The multi feedstock bio refinery, once again, if we talk about the biomass, we are not eyeing on round wood sources. We are eyeing on on residues, which are coming from from the other processes, sawdust bark, etcetera. And, we don't aim to increase, harvesting or also, or land use either. And we want to keep outside of the food value chain. Those are the guiding principles in, in, for us to maximize the sustainability of our feedstock base. We have been practicing in Uruguay, a winter crops based on this Prashiga Carinata already for a couple of years. Cumulatively 50,000 hectares have been cultivated there as a winter crop. This is a picture from a field where farmers there in Uruguay normally cultivate soybeans, actually, as a main and this during their wintertime, the second crop is, is then in this particular case, Prasika Carinata. And, the good thing with this, this development and this raw material base is that it did not only actually the, the product itself, you know, is, is is, then turn into, into CO2 red reducing fuels, but also Also, then, you know, it increases that how, how it's going to be farmed. We call it carbon farming. So it's, it's farmed in a fashion that, you know, which increases. So carbon, binding in the, into the soil. And that can be counted for the benefit of the of this product and raw material. And, that's also been certified by, by the, third party certification, bodies So, interesting, interesting development also as a as a new, new oil plant as a winter crop. UC president already mentioned about what is our status for the potential biorefinery. So we are soon in the foreseeable future going to enter into this, basic engineering phase, which will take then at least a year. And the location part will be decided, you know, ultimately during, during that, basic engineering process. And, of course, we are also closely looking how they're in the EU and also in individual member states in Europe, as well as in North America, for instance, is going to develop and, I'm good to report that there have, haven't been any negative developments in, in the regulation, space during the, the COVID times. Now then I'd like to move on to UPM Biochemicals. It's business, a new industry vertical that we have already, decided to enter into earlier part of this year. And, that basically, is a result of a 10 years work stream. So in that sense, it all started in 2012. Quite a lot of, development, of technologies, chemicals, selection of molecules, finding outright technologies ending up in, then, short listing concepts and also making basic engineering and ultimately then the final investment decision January this year for the, for our Loyna mill, which is going to be located, close to, cities of Dresden in Germany. Maybe one point that I'd like to also mention here, sorry for slipping back. We are, we had this is a platform base for, for our further growth in the, in the years to come. So the next stage is then, you know, which would follow then Loyna in the biochemical field would not require each 10 years. So it will be much quicker development if we so wish. Going to the market. Status of this Loyna investment project is such that, you know, detailed engineering and procurement activities are ongoing and quite well. Our team has established, established itself on the site and construction works have started there, you know, in, in, in that industrial park. Permitting, as customer in Germany runs parallel to, to building the plant, And, and of course, all the safety sustainability measures as well as COVID actions are based on, on the UPM's high standards. So in that sense, we're moving ahead with full steam. Once again, the main products of this plant will be when it, when it starts up at the end of the 2022, we'll be, Bio MEG monolithic length glycol, LinkedIn derived renewable functional fillers, some industrial sugars, and also bio m MPG monocpropylene glycol. And, those products are very much, drop in solutions, especially MEG, MPG, to, to their fossil, counterparts so that can be utilized as such. Renewable functional fillers are more like performance designed fillers, which are then used in, in our customers, future customers' processes. Normally, these, these, bio based products, they trade at a premium, and and a biopremium is also steering our customer selection as we as we, work on the, on the commercial piece of, of this project, in, in Munson, in the next months and years to come. And, of course, we are in a, in the middle of the process of working with several, future customers, brand owners, partners who share our vision, actually, of, of, of, bringing this, this, innovative new, bio based alternatives into the market. Maybe some words about monolithical, so it's a it's a big global market, one of the biggest largest chemicals, in, out there, 30,000,000 tons per annum growing yearly by roughly 4% goes for packaging, textiles, and films, packaging and PET pet portals is a, is a good Good example. It's also the main precursor for Polo Ester Fibers, and films could be utilized, for instance, in our Raflatac business. As a, as an example. And, yeah, so that's our main main product. The other large product which we are producing is LinkedIn and that is converted into, renewable functional fillers, more than 15,000,000 ton market growing roughly 3% per annum. They can be used in various types of, uses in the automotive industry, in the mechanical rubber goods, and also thermoplastic, elastomers in in other industries. And the benefit that we offer is that these, these materials are primarily replacing, carbon black and silica. So environmental, performance and also lightness are, are really the, some of the major benefits that we do. The Loyna plant is based on wood, which is, as we know renewable, it's nonfood, it's climate neutral feedstock, with existing, certification schemes, we we aim to utilize forest thinnings and, and residues of regional sawmills as well. The primary species of wood that we aim to use is beach, which is amply available in, in Germany. Only peach logs are used used currently in the furniture industry and, and, and actually, the thinnings are primarily incinerated in private households. In, for heat. And, and, and that's, that's something that is going to be limited in Germany as well. We had talked about entirely European value chain, in, in terms of wood, wood handling and also wood, wood procurement the investment is in line with, both Germany's and also the state of Saxony Unholtz Bio Economy Strategy. So in that sense, it fulfills, also the German ambitions to grow in the field. Cost position of such a plant, which is 1st of a kind in the world, is consisting of 3 parts. So basically, we are building a totally new buyer route, which is a simpler route actually for, for these main products than the fossil, refinery would, would be. And in that sense, we also are value, Jenny, the credit for, to the, towards the, to raw materials ourselves. Then the middle piece, technology concept is something that UPM is orchestrating. This is something that you cannot buy from any, one supplier It consists of various technologies. It's a high yield process. It's also designed, UPM together with, engineering companies. So that also raises the barrier of entry in, in that respect. And then, of course, the central location for wood sourcing as well as the proximity, close proximity to customers is a, is a given matter. This is a picture of, of the Loyne site, but you will, see a little bit more of that in the, in the, in the moment. Entry barrier to bio chemicals is a multi piece puzzle. I already touched upon it. It took us 10 years to get this far, and it it certainly is not a walk in the park for anybody else to enter into this So it certainly will, will require good balance sheet, readiness to, invest. It, also R and D activities and money that you need to put upfront is significant. Over several years, you need to have access to to wood by a mass and and then IPR rights seem to be in place as well. So this is a, as I mentioned, the platform base for UPM to grow into the future, And it's the 1st building block off of this platform. Very strong market pull is at least from, from the markets customers are excited about these opportunities and, and, and this opens totally new markets for, for unique customer value. And it's a scalable concept, and it's also strong and, and synergistic, fit with UPM platform. I would also like to mention that actually, UPM biofuels and UPM bio chemicals are when it comes to markets also quite synergistic here in, in the future. So with these words, I would like to, welcome you to have a short video of our biochemicals and Deloina site. And I thank you for your attention. We will now, shift our focus from the molecular bioproducts to a second spearhead for growth. And, This is the specialty packaging materials, businesses. Auntie Yaskeleiner will start with a presentation on UPM BRAF attack. Good afternoon, everyone. So UPM Raflatac is a downstream converting business packaging business of of UPM. And, due to our value chain position, we are either an indirect or even direct customer. Of many other European businesses. Our product is the self adhesive label stock. Here you can see examples of our end uses. Some of the big end uses are food, beverage, logistics and, and also personal care. Labels are in many places, almost everywhere, and a big portion of them are, self adhesive. The label stock markets are overall healthy. Even though there can be some volatility in the short term, If we start from the left, the long term demand growth, we believe is solid in this industry, 3% to 4% volume growth per year, driven by several trends. There's expected to be unit growth in many packaged goods, categories We have the continuing, fast growth of e Commerce and, related parcel logistics. And we have technology and market trends such as, substitution of wet glue labels as well as the, sustainability trend in, in packaging, which we believe is a, is a net positive, contributor to long term labor stock, demand growth. However, in the short term, the markets can be more dynamic as we have seen lately, during the COVID 19 pandemic during the early stages, we all experienced the lockdowns. And these lockdowns had an immediate boost, to the demand of, packaged food and many household items. People stockpiled and, and, also, food consumption moved from restaurants and and the service industry to homes. And and this has this has boosted the retail sell through of, packages and and labeling. Well, these kind of effects are temporary. And logically, there can be other, sequential impacts in the short term the inventory cycle, all along the value chain, can reverse and maybe more importantly, the general economic development, private consumption changes. These can have a relatively direct correlation, with the labor stock demand. In these turbulent times, what can bring some stability then is that our mix our end use portfolio is weighted towards segments that are, where the demand is relatively resilient. For example, food and home care and pharma, and our mix is less geared towards segments such as automotive, luxury goods or or durables. Which can be more impacted, if times are tough. Just a reminder, our global, footprint. So we operate in 6 continents and, and, in, more than 40 countries. We sell to over 100 countries, and we have more than 8000 customers. So this brings opportunities, but it is also a source of resilience, because we're not dependent on, any single market, country, or customer. But we'll have a rather broad and diversified, market access. Our strategy to, achieve profitable growth is simple. We want to broaden, our product portfolio. We want to, improve our customer reach and, do that more effectively. And we want to continuously improve our, productivity and and efficiency in our operations and supply chain. And out of these overall strategic priorities, I want to select a few, key initiatives that we are focusing on right now. To develop our business. The first one is sustainability leadership in, in our products and solutions. Then our commercial excellence and digital reach and, the third one, a multi year productivity program. That we run-in our factories and operations. I'll go this through 1 by 1, starting with the sustainability leadership. So the overall packaging markets, the big trend there is the need for more sustainability and recycling. And, many studies indicate that, packaging has a very big impact to what kind of perception consumers have of different products. After all, packaging is typically the first thing consumer sees and touches, in a product. And we hear this trend or the or the need for more sustainability in packaging, loud and clear, anecdotally, from our customers and, and end users. But in addition to anecdotes, we have here a good data set This is a summary of, public commitments, by some 350 large, leading consumer packaged goods and and and packaging companies. This is part of the Ellen MacArthur, 2025. Plastic pact, where where big companies make commitments to reduce unnecessary, plastic packaging increase, recycling and these kind of activities. And a clear pattern emerges from this publicly made commitments. First, the market needs solutions for recycling to to make it easier, Secondly, there's a need for more recycled content, in packages post consumer recycled content. And thirdly, There's a clear need for renewable alternatives and climate friendly alternatives and overall better resource efficiency and and, material utilization. Labels have a very important role in this wider packaging market. Labels, are part of many kind of packages and, and labels impact the recyclability and sustainability of the whole package, not only the label material itself. And we, in Rafalak, we provide solutions to, all parts of this circular loop starting from design and and material choice, to to the end of, cycle, enabling recycling. So like UPM as a whole, we in Raflatac, we are going beyond fossils and, and we are doing that with a wide, portfolio. You remember a moment ago, I I mentioned that, the packaging market needs are, at the resource efficiency, more recycling and recycled products, and then renewable alternatives. And here, we have the 3 r's, our reduce, recycle, renew. These are the buckets that that we classify our offering, of of our products to to help our customers be more sustainable and do better business. Some of the spearheads that are unique to us are, for example, the rough next plus range. This is a product that is the first label stock material verified by the carbon trust. And, there we can provide CO2, reduction in climate change mitigation in a quantified, verifiable way. Compared to standard label materials, and and we can give certificates to our, customers. The other one is, Forest Film, and, this is a unique product. It is a transparent polypropylene film made out of wood. And, it has exactly the same functional properties as as, traditional plastic film. And this is all enabled by the UPM biofuels, as a feedstock. So truly a unique product and something that only UPM can do. In addition to those, positive differentiation opportunities, we believe that the sustainability and recycling trends can also have a positive, impact to the overall, demand growth, market growth, if we only look at the consumer packaged goods, categories, which are, of course, only a portion of the label stock demand. There, the, increased recycling and sustainability needs may favor packaging types that, that, require labeling. Typically, earlier, the traditional plastic and multilayer flex packaging has been the fastest growing, packaging type. And we are not saying that that wouldn't grow also in the future. However, due to the recycling needs, some of the packaging types, other packaging types could, could take some part of the growth and and these types of packages also require, labeling. But creating, sustainable products and solutions is not the only thing we do. Our second, development area and part of our strategy is commercial excellence. So we want to reach more customers and and do it more effectively. And lately, we have been increasing our sales capacity measured by the number of customer interactions we have, and we have been changing the way we work in our go to market. So some years ago, we only used to have a used to have the traditional field sales, Salesforce visiting face to face customers, Now we also have remote sales or inside sales as we call it a very efficient, resource pool to serve, especially some of our the the many smaller customers that we have. And then we have our renewed digital platform that can enable most of the sales and service functions, to our customers. So in the last couple of years, we have effectively doubled our sales capacity and customer interactions without any increase in in net headcount or or costs, but rather, by shifting resources and and, working smarter. And during the COVID lockdowns, we never missed a bit, but, in a in a in a very rapid base transformed our global, sales organization to be virtual and, and all the time, we have increased, our, our customer contacts. So enabled by the earlier hard work in in developing these commercial excellence and processes. And, last but not least, our third pillar in our strategy is continuous productivity improvement. It is, often we start from factories, operation, supply chain, but actually we want to see productivity improvement as something we do, in, in all our activities. There are some, measures here. Our sales has been growing our mix is trending, to the right direction, our sales efficiency has been increasing, then, OpEx for volume and the quality costs. This we track very carefully and and want to keep improving. And then capital efficiency, we want to improve. After all, it, together with the margin that brings the return to our capital and, and, ultimately shareholder value. So this productivity improvement, is not just, it's it's not one project. It is not one tool, but we want it rather to be a part of our culture. Sometimes our KPI curves are, are not smooth, and and and we may get even setbacks if if circumstances change. However, then we just need to get back to improvement track and and, keep improving. So to summarize, we operate in rather resilient markets, our end use portfolio and and our global footprint. Brings further resilience, to our business. The long term demand growth, prospects in our industry are solid even though can be some volatility in the short term. We are also a bit, countercyclical, compared to some some other businesses the raw material cycle treats us somewhat differently at different times. Sustainability is the major trend in in packaging, and we are leading the developments there. And we continue our performance drive through commercial excellence. Digital reach and and productivity improvement in in everything we do. This concludes my presentation, but as a final thing, we have a short video of our unique, forest film, concept. And product. Thank you. How could we make a beautifully transparent label like this one? In a more sustainable way. What if we could make it from? Would? We already did. UPM Raflatac Forest Film is the first of its kind as a 100% wood based film label material. It's versatile, durable, transparent, and sustain Forest film is born out of the circular economy. When wood from sustainably managed forests is processed for pulp, The resin is used to make UPM Bioverno. The raw material in Forest film, Be smart and choose labels made from renewable materials. Join us on the journey towards labeling a smarter future beyond fossils. Alright. Let's continue on the same, same value chain, at least partly. And, Taconicula will present us UPM Specialty Papers. So hello on my behalf also, and I will I will now go through what is topical in UPM specifically paid first our business is divided into into 3 areas. We have this label and release part of the business, which is, which is a global global business. Then the packaging papers, bar is is more focused in in Europe, area and and focusing, especially on on flexible packaging papers. And then, this APAC fine paper business, is mainly content on on, on Asia and market China and and Asia in general and including office and and graphic papers. And, from the graph, you can see how the performance has been the EBIT and EBIT margin in in past years. And then, as for this last 12 month period, it has been, quite favorable for for a specialty pay pressure. As for the business, so so, the long term trends clearly are supporting, our growth. This year has been exceptional, but, but this increasing sustainability awareness clearly, clearly plays a big role, when we are looking into the future development of our packaging business. Similarly, in in Asia, for the fine paper business, it it has an increasing importance, and it, it really makes a difference when when UPM is operating in that market. As for the e commerce in general, this year, has been quite exceptional, because of this pandemic, and and we we are really benefiting from from that growth, in the label business. Aging populations, single households, also affecting, especially the the package business, label business. Asia And Economic Growth, so that has been, benefiting our our business for for many years already. And and we expect that to continue, especially, in China, Southeast Asia, and then this urbanization and growing middle class. So so it's more about, moving from fresh markets to to supermarkets, and and this will this will surely have an impact on the packaging materials and and labeling business. UPM specialty papers is is well positioned for for growth. Said a label and release is a global global business where we are a global market leader, especially in the in the release based papers. Globally, we have a market share of of more than 25% It is roughly roughly 1,600,000 tonne market, which we expect to continue to grow, some 3 to 4%. Per year, based on these megatrends, explained earlier. Similarly, for the packaging papers, we we have already strong foothold in in Europe, and, and that's a good basis for future growth. In flexible packaging, it's it's so much about, the, the material that, as you can see from the, the other graph on the bottom that, that steel plastics play a majority of the or major role in this this, application, and and it's estimated that paper share would be only about 10% at the moment. So even if, global flexible packaging, whatever the growth number will be, we are estimating that to be in the range of 2 to 4%. So then this replacement, especially plays a big role on how, how well can paper be introduced in the in this this business more wider than than earlier, replacing these fossil based materials. And then for the APAC fine papers, there, we have a strong it's a, like, 35,000,000 ton market where UPM operates with, less than a 1,000,000 ton capacity, but still we have been able to build a a more than 10% share in in their office papers in Asia. Based on our own brands, UPM brands, and and also this OEM brands. And then we are very selective needs player in in the graphic papers. But that has also been, you know, a good, good strategy for for for UPM Specialty Papers in fine grades. And then, for the for the growth strategy, starting from the APAC fine papers. So so there, it's more about the balance between the the office papers and graphic papers. And and, said we have strong UPM brands, we have been investing in past years, in new capacity in office papers and, and, and that growth will continue. At the same time, in graphic papers, it's being very selective with the markets, with the customers, with the distributors, with the end users and applications where we operate. And and similarly there, the entry barrier is something we are focusing on and trying to select, end users and and products where where it would be a bit more demanding to to enter. Then, moving into label and release. So, in face papers, it's it's a lot about the value creation and and, making sure that we are competitive in the standard grade recently we have been able to to develop, cooperation models with, with communication papers within UPM so that we are able to utilize so their assets, in order to, to make sure that we stay in the game with, with, kind of, standard grades. And then at the same time being able to utilize our own own, specialty paper assets, for these more demanding, higher demand papers and, and creating more value that way also. And then for the release based papers, that's the area where we have been investing, a lot recently or in recent years also. And there, it's also about expanding the product portfolio so that we now have a a a full range of of products for for different applications, whether it's in self adhesive label or whether it's in in, more industrial or tape applications, and covering asset at the whole globe, with these regional features also. And then the the packaging part of the of the business. So so there, that's a lot about co creation and and, it's it's cooperation with the suppliers with the with the corner with the machine suppliers, with, with brand owners also. There is historical pool in the market so that, that we have never experienced such such an interest in in fiber based materials. Earlier, with the target to replace these fossil based based materials. And, and this development is is, still shaping, and and nobody really knows that what are the the kind of winning, winning formulas, but, what we have already seen and experienced and learned is that, that, we need good partners. We need good networks. And, and often it's, between at least 3 different parties when when we are developing this this, successful, solutions. Moving into the competitive advantages that what is the customer value when when dealing with, with UPM's a little paper. So so clearly this, the edge from, sustainability is is in the core of of all of our businesses, whether it's, fine papers in in Asia, whether it's the packaging or whether it's the label label and release. The UPM as a company is is recognized industry leader. We can, we can bring all that, to the table, for the benefit our customers. And, one example from from, this unique sustainable products within within our business is, is nearly launched, recycled release liner, meaning that we we are collecting the, the used material, deselectronic it and then then reusing that fiber. And, I said in in Asia, we we are known for for, this, FSC certificates and only using sustainably managed, fiber. And and that really is a differentiator in the APAC market and and has been the foundation of of our reputation over there. Then as for, trust and commitment. So so it's it's whether it's existing businesses or whether it's the new new business is what we are developing. So clearly, based on these, expertise, what we have in specialty papers, we have been developing this production platform, by investments and by cooperation models with, communication papers. And then, this co creation, which is, which is, quite quite an exciting, exciting, new way of of developing, solutions for the future. And UPM is a financially solid company, and and we we have shown that we have ability to to grow and invest. Ease of doing business. So it's it's all about the reliability and keeping your your promises. And, we we are one of the few companies in specialty papers who who really can reach and serve the customers globally. And surely we have we have a good team to to do that. This slide is illustrating, how how the platform has been developing. So currently, we are operating in China in Finland and in Germany. And in these recent years, the investment money has been, more than 400,000,000. And I said it has been focusing more on this release liner. Base papers, and then, these these, arrows in the map are are showing that how how we can served the global market and how we are serving the global market. And then as for this, extraordinary year, when when COVID nineteen has been with us, so so also there, the role of specialty papers has been whether it's in in reliable logistics tracking or, or whether it's in in labels for for pharmaceuticals or or medicine booklets, from based on on UPM Pine Papers, or then offering these, barrier papers for for, ensuring food safety and and higher hygiene levels. And then as a as a summary about our strategic priorities for coming years, so clearly, succeeding with the with the recent investments, making sure that we ramp up and scale up everything, what, what we have done, and and, and then focusing on on developing these new businesses, new products, expanding and commercializing this this offering, so that we are ready for the future growth also. And then in the in the DNA of of our company that we have efficient and competitive operating model, boosting this operational excellence and and, lean and flexible organization. That was all from my side. Thanks for your interest. Thank you, Yako. We have one more presentation before we we have the first Q and A of the day. So so now we will have a presentation by parent icons, and he will discuss pulp markets as well as the paso dela Torres, project in Uruguay. Hello, and good afternoon. Today, I will focus on 3 items. First, a quick look at the long term pulp markets relevant for our investment project in Uruguay. Secondly, I will give you an update on the project itself. How do we manage the project in these uncertain times, and how do we ensure that project schedule and investment remain on target? Thirdly, we will briefly touch on the business and commercial strategy, which ensures that we can place additional volume into the markets in a profitable way. So let's start with the pulp markets. We believe that the long term demand for recyclable and renewable fibers will remain strong. All global megatrends continue to be valid despite the corona pandemic. The trajectories of population growth urbanization, and middle class expansion will not change. This in turn will impact the consumption pattern for basic and luxury products. Additionally, e commerce and digitalization will be even more present in our lives. Resource scarcity and the role of renewables, one example is wood based textiles, remain extremely important as well. During 2020, we have seen the impact of the pandemic, stronger decline of graphic papers, high demand of tissue, especially for the at home markets during the first half of twenty twenty, and new sectors in market have adopted and joined the e commerce train. Despite these effects, we believe in strong demand for pipe in the future paths, we shouldn't even say despite, but rather because of, as we are seeing also a new trends emerging. For example, sanitation and cleanliness standard, which in turn will drive higher fiber consumption. In 2019, 66,000,000 ton of market pulp were consumed. Slightly more than 50% was hardwood, while softwood made up roughly 40%. Around 36% of the market pipe was delivered to China, roughly the same amount to Europe and North America together. If we look at the product split, the lion's share of market pipe is consumed for hygiene products where tissue is around 38% and fluff pulp 10%. The potential in tissue becomes evident by looking at the per capita consumption figures for the world. The mature world consumes tissue in the range of 12 to 26 kilograms per person and a year while the word average is at around 5 kilogram per person in the year. China is slightly higher than the average, at 6.2 kilogram per person and year. With a growing Chinese middle class, the tissue consumption for China will be significantly higher in the availability of recycled fiber to produce tissue, packaging and specialty papers. Recycled fiber is crucial for these products. For example, in tissue production, slightly more than a quarter of the total fiber amount is recycled fiber. Especially in the away from home sector. Let's take a look at the following illustration comparing the effect of the decline in graphic paper in 2020 versus 2019. Let's start with graphic papers. Graphic Papers declined roughly 13,000,000 tons year over year. This implies that the available recycled fiber declined by 7,000,000 Assuming a similar split as in previous years, 3,000,000 of RCP was utilized for graphic paper, and market pulp deteriorated by minus 2% due to the decline in graphic paper. This means for the tissue board and specialty sector. There's roughly 4,000,000 tons less RCP available than in the previous year. And that in turn provides substitution potential for fresh fiber for market pulp because it is market pulp as the easiest available virgin fiber, which can replace RCP. All these numbers are based on RISI Hawkins Wright and our own pulp consumption model. Let's turn the focus now to our fascinating and impressive growth project in puzzle stores. Before sharing some insights, how we manage the project, and keep it on track despite the pandemic, Let's look at the following video to get a feeling for the size and impact of the project. To ensure that the foundation of the project is strong and all prerequisites for success are in place, A lot of diligent work is required. Between the start of the plantation expansion in 2010, And the investment decision, several milestones had to be completed. I will highlight a few of them. July 2016. Start of the discussion with the government of Uruguay. The theme was the prerequisites for long term industrial development in Uruguay. Then November in the following year, UPM and the government signed an investment agreement outlining local prerequisites for a potential pulp mill investment in central Uruguay. The purpose was to reach a mutual understanding when it comes to the needed infrastructure development. Referring to railway, road, and port. After signing the investment agreement, The focus was on pre engineering and permitting, which took roughly 2 years. In July 2019, the investment decision was achieved, and the project officially started. The brief roadmap highlights the amount of work and preparation needed for a successful start of a project of this magnitude. The foundation for the profitability of such an investment were already put in place a decade earlier. Parallel to all these activities, the project organization was finalized. Today, we have the best expertise in place with experienced global project managers and very strong local knowledge and relationships in all areas. On the supplier side, we have long term partners involved in the project, another ingredient for successful implementation. And not to forget we have already a very strong and competent organization in Uruguay. The Fibentals team is supporting the project and also the recruitment of personnel for the time afterwards. Uruguay quietly beats coronavirus. Distinguishing itself from its South American neighbors. Once again, this was the headline in one of the online news portals. Latin America is one of the world's coronavirus epicenter, but Uruguay A small South American nation of 3,500,000 people has so far avoided the devastation raging across the rest of the region. All of my success factors in containing the effects of corona are lower people density, stronger health care system and political consensus. Uruguay moved swiftly in March to enact social distancing, testing, and community tracing. Though the president, Lacasse, never decreed a lockdown. Offices and shops are open for business. And all Guine children returned to school in June, even with winter and flu season, in the southern hemisphere. UPM has adopted very tight protocols to contain the pandemic. On top of the typical guidelines, such as the use of mask and hand sanitizers, physical distancing, I would like to highlight the temperature checks and frequent testing at the gate and the dedicated COVID 19 manager who coordinates all activities with all contractors. The following slides illustrate our site management. The same shift works and lifts together. We have dedicated passes for each shift which are disinfected after each use. We take temperature checks at the mill site gate. Each shift works in one sector only, and we recommend avoiding social activities. We had one corona situation a few weeks ago, but could contain it very swiftly. The first diagnosed case COVID 19 case in the project was identified in August. A contractor returned from Argentina where he was tested to before coming to Uruguay. Once he took the 2nd test in Uruguay, he was tested positive. Immediately, the whole team who traveled together was identified and isolated and remained in quarantine. Around 43 people of the project. And after the current time, all were tested again and cleared healthy before entering the site. And no further spreading of COVID in our project was identified. So we were able to contain the virus very efficiently. Let's turn now to the business and commercial strategy, which will enable us to place additional pulp volume into the global markets. First, we start with a business strategy. The business strategy is summarized in this one slide. On the right hand side, you can see the foundation for our growth and for our business. Starting with a customer, we have a very solid customer book, as we have seen also throughout 2020 with very strong deliveries in the first half of the year. In the Finnish platform, consisting of 3 pulp mills, the forestry organization and the timber business, we are driving efficiency and reducing the cost through our own measures. The All Brine Organization is focusing on supporting the Rose project, and at the same time reducing the cost structure of Pry Bentos Pulpmel. As business enablers on the left hand side, we have identified 4 items. First of all, safe and sustainable operation as this is a foundation for any business. Our target is to establish world class business processes in what we are doing and how we are serving the customer. Hence, we have also made organizational realignments, and we have increased the competence in this area in our organization. Certainly, climate positive forestry and a winning team. Our commercial strategy includes the following elements. Understanding customer needs and chosen end users and serving them with different pulp products from one supplier. Long term relationship based on mutual trust highest service level when it comes to flexibility, deliveries, and technical support. And not to forget, sustainability, which is at the core of our cooperation. We focus on growing annual segments and tissue, packaging, and specialties, and additionally selected partners in printing and writing. So far, our sales activities were concentrated in Europe And Northeast Asia, China, South Korea, and Japan. We are growing our presence in Middle East, North Africa, and Latin America. Additionally, also South And Southeast Asia. A possible entry to the North American market currently being evaluated and will be decided next year. Out of the preparatory milestones, we have completed so far, I would like to highlight the global rollout of our new ERP system, despite the restriction imposed by the pandemic. The new ERP system forms the base on which we are currently developing new efficient and advanced processes and tools. Whether they are in the area of business analytics, product quality tracing, or logistic tracking. To summarize my presentation, pulp demand continues to grow. The megatrends are here to stay. And are supporting our business and our investment project. Secondly, the implementation of our growth project in Uruguay is proceeding at full speed with strong local commitment and excellent project management in place. The commercial capability ramp up is proceeding. Thank you very much for your attention. Thank you, Parent. This concludes our our presentation part recovering our spearheads for growth. We will now take a a short break. And after the break, we will have the first of the Q and A sessions covering these, presentations about the growth businesses. So see you back in about 5 minutes. Welcome back. We are now ready to start the 1st Q and A session of the day, and this session will cover, the growth businesses, that we have just, present it before the break. And we have here Yurkiyrivazka, Antiaskala, and and and, y'all, yaconikula, here, and then we also have Ben Dikens, over the line, ready to answer your questions. We have received quite a lot of questions regarding our our biofuels, biochemicals, initiatives. So we'll start with those. So, one question is, what kind of CO2 reduction impact could we, aim for, in this Kotka, next, next biofuel plant, we said that in La Peranta, it's 80%. So so Yeah. That's correct. The La Peronta has reached actually based on crude tall oil, you know, 80% CO2 reduction. Now as, as I told, we are aiming to grow into also other UPM integrated feedstock. So, that would mean, especially in the biomass. So we can go up to 90% maybe even more. We aim aiming actually to pick up a neutral, but, that might be a bit too much to promise at this stage. So aiming for 100%. Then there is actually quite many questions regarding, that next biofuel line size, investment, profitability. What, what can we say at this stage? Well, size, we already mentioned it, and it's roughly five times the size of of the clapper and the biorefinery, and I disclosed also the profitability numbers. So that gives you an idea that if it's a five times larger size, and it actually, the investment course cost was about 180,000,000 for La Perranta. I think that gives a pretty good indication of what we're what is there to be expected. Specifically, here is a question that laper at the buyer, but lumper seems to be nicely profitable. So so can we expect the the next line to be as profitable or even more? Well, of course, it's larger size. We have some economies of scale, but it all depends, you know, then we have new technologies as well. We have new feedstocks, how effective are we basically in managing the raw material sourcing, and how effectively are we able to run the mill, that would depend? That, that will define the cost chart. I'm not that worried about the, the sales front and, and customer front. I, I guess, that, you know, we, we, we have learned that in the past few years. Yeah. How do you think, when and how do you need or plan to add capacity to support your, your growth in specialty papers? What's under, what's going at the moment? And, We we are still, scaling up the existing, or the most recent investments. And I think we have now good capabilities to to develop the new businesses based on these assets also. And as I mentioned in my presentation that we have, we are cooperating with, communication papers. And, and, they are already producing some of the standard, grades, what we need for, for serving the business And then we are utilizing also some of their assets for developing this new, especially the barrier grades. So I would say that, that for the time being, we are all with the current setup, with the investments, what we have made, and with the cooperation models, what we have with communication papers. But then Yes. We are still in the in the kind of coming years. We we want to be in a situation that, we are talking about major investments. Yeah. Then the kind of common theme in, in many presentation seems to be as, as Youssey was raising these barriers to entry. So what do you see is, is are the barriers to entry in your business? Barriers to entry. It they they are variable, but then, when if starting from this class in type of paper, so so we have, been producing as a company, those for roughly 40 years. And, and, there's a lot of expertise within the house. We know even from our own projects that, that they are not not easy products, to to produce. And, and and everything has to be spot on in order to seat and, and it's it's quite a different world from from, publication papers or or other other more standard grade. And then when talking about these packaging grades, the the battery air papers themselves. So so there is a it's it's all about this, kind of building the solution together with, with, brand owners or, or machine suppliers or converters in the value and so that, co creating the, the, the solution, so to say, so the product itself, the technology is needed, the chemistry needed, that that's a barrier for entry, but then also these cooperation models that, that you are ready ready to to co create. So so that's quite the barrier also. Yes. Parent. Can you hear me? Yes. I can. We we have received the the same question for you. So what is the barrier of entry in in the pulp business? The barrier of entry is is clearly in achieving an excellent cost structure. We have communicated for puzzle stores, 280 US dollars. And in order to achieve that, we need to have plantations which are planned and planted 10 to 15 years earlier. And so, also, the infrastructure needs to be in place. If you just look at the, at the cost structure of a pulp, pulp mill on average, 60% is variable costs, and thereof 75 is what cost a loan. And then 20% is logistics cost. So by, like, good planning, which already, like, I mentioned already that, for Parcelosto's plantation growth started in 2010, you can, optimize the cost structure of 60 percent of the total delivered cost. And this is clearly a very high entry barrier you cannot just make a decision to invest in the pulp mill and start it up in 2 years from now. Ben, what about what what about the market growth? We have received questions about, you you presented quite positive long term trends in the market that support the growth. What kind of, growth rates in, in, in tons would you expect in the kind of meet to longer term. I mean, if you look at the history between 2009 2019, the the pulp market grew roughly by 1,500,000 ton per annum, Yes. There's an impact by the pandemic, but I I do believe looking at some megatrends that, once the world is able to manage and contain the pandemic, that we can also get back to the historical growth parts of, the last 10 years. And if we then focus on eucalyptus, eucalyptus was even the fastest growing, pulp species among all the the different pulp rates, which we have. Let's let's take a for a for a period of You talked about, recycling trends in the in the packaging side. What are we doing, on that front, regarding plastics and plastic labels. And, do you need to co invest in in waste industry or something like that? Well, we are mostly enabling, recycling by, by our own products and and collaborating, with, other, other other stakeholders, customers, end users. So we, of course, have our rough cycle service which is, which is a good service, you know, industry. But if we look at the wider scale, the, the big question of, of, plastics recycling and investing in, in very large, capacities. That is something that, we believe will probably happen but we are not, considering ourselves, any any bigger investments into into the waste let's say the waste industry side or or this, recycling, side ourselves. But we want to influence it and we want to cooperate. You're okay. Regarding biochemical, so a bit similar, like, like, the next biopuel plant, what, what can you say, or what can we say something about the profitability and returns, of, of the biochemical side that is under construction? We are basically missing, an internal and also external reference point because nobody has done this, what we are aiming to do, in, in biochemicals. But, as we have stated also earlier, we, we do believe that once that plant is up and running, we should be able to achieve, return on capital employed level of 14% or more. So it's clear that, when entering a new business area that we need to, see a lot of business potential, not only in terms of business growth, but also on profitability as well, which is attracting us to be enter into a market like biochemicals? Yes. We have set a new percentage as well that we expect to be in a a a fairly good cost position, but what about the buyer premiums, what what kind of, What, what do we see in the markets? Well, as I said, you know, that it, by a premium is a is a will be a guiding principle in our customer selection. So and that might even, define the split between different applications. So, it's, it's clear that, you know, that is necessary for us. And, based on our discussions with our customers, we we know that, you know, it is also available. It's too early to, at this stage, because we have no firm contracts to, to give any, any given number, in, in that respect, but, that is clearly in our focus. Then we have received several questions, about the scalability of this biofuels, biochemical lines in different kinds of questions. So there has been Is there potential in Lappeenranta to kind of go beyond and continue to grow that site? What are the next potential next steps beyond the next speaker line, which is, of course, further along, or then what, what, in, in, in, in biofuels, which clearly are, my main focus is now in the next growth steps. And that is the, they say, the new new plant that we are new bio refinery that we are considering. There there is some decouple, the, bottlenecking potential in, in the left hand of the bio refinery as well, but, that's not, you know, let's say immediate focus at the moment. Money is already, and resources are on that field. But it certainly, we, it has a platform nature as well in biofuels like in biochemical. So we have designed this, there are biorefineries in a, in a way that they could be then replicate it, you know, you know, faster pace, shoot the markets and other outlooks and the readiness of the company so, so dictate. That question for you. Raflatax performance in the first half was also really strong. So what what what drove that and, how much of it is sustainable. So the first half of the year with the COVID lockdown side, I guess it's a safe to say that it was exceptional. And, and our improvement, I think it was driven by both our own actions. We have been driving to, improve our mix margins and cost efficiency all the time, and we entered the year with a relatively good run rate in Q1, But then it is, it is quite clear that, as I said in the presentation, both on the top line and demand side, there was a real boost from this COVID lockdowns. And also on the cost side, we, like, like many other businesses, perhaps have seen a lower cost level during the lockdowns as well for obvious reasons. For example, less less travel and less activity. So maybe regarding the, how much is internal work and how much is its exceptional market situation we will see what the future brings. And and we, of course, don't guide, guide forward, but maybe I'll just quote our CFO and c CEO what they said in the, q 2 re report that that, that it was we have not established any normal unfortunately. So so, so there was exceptionality in the markets, in the spring. We, of course, aim to continue doing all the improvement measures we want, but we will then see what is the new level. Barent, we have received a couple of more technical, shorter term questions. How relevant is the Shanghai pulp futures exchange for the physical pulp market. What can you say? Yes. The, Shanghai Futures Exchange market was established in 2018. So far, very few deals have been done. Physical trading deals have been done in the in the market. And of course, they are trying to get into the RMB market, in China between the traders and traders or the traders and the end user of for the pulp. You have heard perhaps in the beginning of September, they have amended their warehouse policy noticing also that with the existing, 9 outlets, it's not sufficient to serve all the customers. So in that respect, I think they are trying further steps to to become more relevant. Another shorter term thing, is there anything you can say about the kind of, customer inventory levels, there's some questions about the kind of, market balance and, and, what's the current situation? Let's put it this way. I don't know too many customers who are running out of pulp. I think pulp is, availability is is is good to solve it. We see some initial and and, some perhaps weak demands that, demand is picking up after the slower months, slower summer months, but it's too early to to really make a clear conclusion on on on the status right now whether this is, real demand and also consumed or whether this is speculative buying because of, let's say, anticipated, issues when when it comes to the to the shutdown, for for the second half of the year. Yes. One last question. There's a question about, Urke, about our partnership with Dow for replacing plastic in, in liquid packaging. How big is the market opportunity and, perhaps it's better to, to frame in the kind of context of petrochemicals overall? Yeah. There's a huge market in, for this NAFTA stream that, you know, by by a few of refineries are producing. And, and the good thing is that actually our planned biorefinery will have a higher share of naphtha than actually our upper at the plant. And, there, we have only taken the first step but, there's a lot of opportunity out there for various types of, chemicals and, plastics. And, and once again, I guess we will be guided the value add that we can, we can create for our customers, but also ourselves. Thank you, everyone. Thank you. And, we conclude our first Q and A here, and we start our last part of the presentations, focusing on, on performance and measures to ensure performance, and we will start with a presentation by Winfried Shower on Communication Papers. Good afternoon, ladies and gentlemen. In the next ten minutes, I will give an update on communication papers. Let's first have a shorter recap who we are Communication purpose is, graphical paper supplier of UPM with a total capacity of 7,000,000 tons, newsprint, magazine papers, coded and uncoated, and fine papers coated and uncoated. We have, in total, 14 modern and efficient paper mills and including 24 paper machines. Our main end users are newspapers, magazines, catalog supplements, inserts, books, posters, copy paper, direct mails, and promotion materials. In total, we have a bit more than 7000 people and 1600 customers. Looking back, we have a 5 year track record of improving profits in quite a challenging business environment. Despite a high volatility in input prices and sales prices, what you can see on the left hand side, we achieved almost stable quarterly results with an improving trend. Some of you remember this visualization used also in the Capital Market Day 2018 and underlying the implementation of our strategy. The main cornerstones of our strategy are a high asset utilization, a stringent cost management, and the strong commercial focus. And this finally did lead the last 5 years to a cumulative free cash flow of €1.9000000000. After a solid quarter 1 2020, COVID 19 pandemic significantly affected the market demand in the second quarter. As you can see from the left hand side, the demand in the first quarter was roughly around a minus 8, minus 9% and, went down to minus 30 to minus 37% compared to the previous year quarter. Our we have been able to keep health and safe operating conditions for our people in the mills and in the offices, and meaning that our operations did continue all the time. Customer service and office stuff partly moved to remote work, but since June, July, most offices are are back. When it comes to the volumes, the most significant drops have been in commercial print, in offices, nonfoot retail, and for publishing in countries with a high share of free sheets, like, for example, UK, a kiosk, and, use stent sales like in France. Countries, of course, with the strictest lockdown measures also detects biggest drops in volumes. Here, we have drafted the demand history, schematically, and possible scenarios. Please note that this is not a forecast. On the starting from the left hand side, the European graphic paper demand peaked around 2000 7 before a certain trend decline started. Financial crisis did come 2009 with a decline of about minus 5 15%, but also with a elastic recovery of 30 to 50%. Then we have had quite a long time. 2010 to 2019 was roughly a 20% decline of minus 5% per year. Before then, the COVID impact popped in in the quarter to, 2020. After the dip in quarter 2, we see early signs of normalization, a permanent one time adaptation of new consumption habits and use of digital technologies is likely. There are also possible changes in the demand decline trend. So trends, of course, towards digital publishing, subscription models, growth of E Commerce, and also adaptation of digital records and workflows in administration, but also other trends like paper as a chill media, for healthy offline time and also the contamination of trust in media effectiveness of print promotion. And that does lead us to the asset utilization. Since 2013, we have closed, sold, or converted 17 Paper machines with a total capacity of more than 3,000,000 tons, to adapt our capacity to the customer demand. That went along with remarkable cost savings. The recently announced plans will actually follow this line. What I would like to highlight, the continuing unit, so the remaining fleet got stronger and more competitive. With all the changes, we are enabling good transfer Possibilities, retention of the business, and finally, a good service to our customers. But this business is not only about adopting, applying digital technologies. It's also very relevant. So, this will actually improve our customer experience, productivity, and cost efficiency. And our main three fields are the cost customer front where we build up new digital channels we improve the effectiveness of our production lines and finally, also, process efficiency in our back office. Last but not least, sustainability, energy supply security is a cornerstone of our business And that's, of course, very along our, strategy. And our focus is here on strategic energy sourcing. Were economically viable, building on operating efficient and sustainable generation units. And we are committed to a clear CO2 reduction pass and will reduce its overall CO2 emissions by 65% in 2030 compared with 2050. And so for We have also a couple of projects initiated like a new biomass boiler and hurt, wind power purchase agreement in Finland, gas CHP boiler in Northland, and we also think about a new or an additional power purchase agreement for renewable energies. Let's come to the summary. So, I think we have proven that we can deliver solid financial results. COVID 19 is primarily a demand crisis for our business. Which we can address by capacity, management actions, and good customer care. Our energy agenda actions will reduce emissions and also strengthen our competitiveness. And with the graphic paper market of 70,000,000 tons globally. And about 20,000,000 tons in Europe, we remain convinced that there is a profitable future for competitive players in this field. Therefore, our financial target 14% free cash flow of capital employed remains a good and relevant target. Thank you. Thank you, Winfried. Now we are ready for our final presentation for today. Tapia Korpen and our CFO will will summarize today in in financial figures. Dear listeners, everyone online. In my part, I will first, discuss performance and cash flow And, then I will summarize the UPM investment case by talking about capital allocation and, returns. But first, let's look at this slide, which you saw already as part of Yousse's presentation. Youssei described the transformation that UPM has been going through, during the last 10 years. This has set the stage for us for the transformative growth investments that we are implementing. Transformation has transformation has taken place in terms of financial performance and our balance sheet. Here, you can see on the left hand side, performance improvement and the change in the mix, the growth in the higher margin businesses has driven EBIT, and EBIT margins up, during the years. Therefore, returns have, increased and we have exceeded our return on equity target during the recent years. And at the same time, net debt we have been able to reduce to, below 0 into negative, net debt. In UPM, our view already in 2009, was that if we want to consider large scale investments such as the 2nd pulp 1,000,000 in Uruguay, we must have a debt free balance sheet. Obviously, at that time, nobody could, think about a pandemic such as the COVID 19 that we are experiencing today, but we did know that it's likely that at some point in time during the investment cycle, we will experience a downturn that could be even severe. So for today's exceptional, circumstances coming, from the COVID crisis, we are well prepared. Here in this slide, we have used as a proxy, the level of performance of, first half. Of this year in the, in the current, exceptional circumstances and, considering the impacts that we have seen, particularly in the second quarter, obviously, performance is down from the record levels that we saw in 2019 2018. But again, I would say, given the circumstances we are performing relatively well. And both in terms of the positive and the negative short term impacts, from the, crisis that we saw that killed during the second quarter. This is not the new normal. It is the UPM Business model, that allows us to perform, even under uncertain times. We have 6 cylinders to our engines each of the 6, business areas have a very clear agenda in terms of, developing the business longer term and very clear focus in terms of managing performance and the bottom line, operationally. And I would say that looking at the past year, each business has shown very, clear record of turning around performance at times. When the business environment becomes more challenging. Here in this slide, on the right hand side, we can see the excellent, result and, profitability of specialty papers and, UPM Raf attack during the first half of the year. On the other hand, in UPM buyer, finding the impact of the cycle low level of, pulp price is, obviously clear as well as, as far as the performance or or the result of the 1st half is is concerned. But as said, the positives and negatives, are normalizing. In the meantime, we take action. This, shows the list of actions that we are taking to improve performance, to improve competitiveness, which is key in this kind of a business environment including the recent announcements, like the plant closure of the Kypola Mill or the implemented closure of, UPM Chapelle in France or, for, UVascular Plywood mill, the plant, streamlining in, biorefining, in Rafatuck, in UPM Specialty Papers. I won't go through the whole list here, obviously, but the message is, we have actions under implementation that improve our cost efficiency by €120,000,000 compared to the level of performance during the first half of this year. Robust cash flow has been and is a hallmark for UPM. And here, in this slide, you can see that the, operating cash flow has been quite consistent during, the recent years. It all starts, from EBITDA, obviously, and from the fact that our rate of a cash conversion from EBITDA to operating cash flow is very high. It also shows that, even if we do have restructuring costs, affecting our cash flow, then, at the same time, typically in those, years and times when, restructuring is necessary, we do also have released from working capital, balancing out, that cash flow impact. Finance tax, we are efficient there. And during this, time period that we are looking at here in the recent years, the focused investments and the low level of needed maintenance CapEx has meant that, free cash flow has stayed quite steady as well. 2nd perspective on cash flow is this one looking at the cash generation by business, all UPM businesses strongly contribute to cash flow. Here, first, again, you can see by each business, the high conversion rate of from EBITDA to operating cash flow you can see the performance, cash performance of communication papers, which has been excellent. But we are not dependent on communication papers, cash flow, still majority of our cash flow comes from the other. 6, other 5 business areas. On the other hand, also, touring, or for the coming years. 1, can you expect that communication papers will continue to generate cash flow, here again, highlighted the fact that even when restructuring is necessary, the working capital release has been able to compensate for both CapEx and, the restructuring impacts to a large extent. Another hallmark, for UPM has been very diligent capital allocation. This is the slide that we have shown you several times during the past couple of years as we have been preparing the investment decisions for for Uruguay for the, loyna, biochemical plant. I would say that, as it says in the in the title of the slide, this picture in our view, despite the recent events, and the current uncertainty related to the COVID, pandemic, this, view is intact, CapEx. Will, if we look at the next 5 year period, more than double, the level that we have had earlier considering, Uruguay, Pulp Mill investment biochemicals eventually, moving ahead, with the biofuels, investment. But at the same time, it is our view that we can continue to have a consistent, positive track, on dividend. This is the big picture, that we look at when thinking about, capital allocation. And has said, it is in our view intact. We have built as already mentioned, a strong financial position. So we are in a comfortable situation to fund the investments and the CapEx outflow to come during the, next quarters years we did actually, during the time when our net debt went down to 0 and below, receive a challenge from many parts. Does this really make, or many, many directions? Does this re really make, financial sense But, I think at the moment, we are, again, quite confident and comfortable given the balance sheet thinking about our financial position going forward. UPM has, quite strong story to tell in terms of, returns, from the businesses and from the investments that we have made. It all, of course, is built on, the targets and the results, of returns for each of the UPM Business Areas. On an LTM basis, 4 out of the 6 business areas are exceeding, the return targets. And, in UPM Bio Refining, We are currently on the LTM basis below, but there we are, once again, at the cyclical low point of the pulp prices in UPM plywood. Also, at the moment, we are below target there actually already in 2019, we felt the turnaround of the investment cycle in the in the global markets. But, again, it's all built from the business returns then looking at the group level returns, there are two things, to sort of note or to keep in mind here, one is that, looking at UPM balance sheet, almost half of our assets in our balance sheets are accounted for at fair value, meaning, our forest, onings, and plantation land and, most of our assets in European Energy Business Area. The second point to note here is that, obviously, as net debt has gone down to 0, it means that return on capital employed and return on equity, become the same. Taking a closer look quickly on the forest assets, question that I'm sometimes so recently actually asked is that why is it that the valuations of forest holdings have been going up Is it because, the returns are increasing, or is it that the return requirements are going down? And I can say that in the case of UPM, it is that the real returns from the forest assets that we own are going up, and that is driving the value of our forests. Like in this, slide, we are illustrating, again, during the past about 10 years, the mix of our forest, holdings or, and forest and plantation land holdings has changed. We have shifted our way to the southern hemisphere to Uruguay, which means that, productivity in terms of growth has, almost doubled, doubled, and that, has been driving the increase in the value of our, forest assets. Another look, at the UPM Energy Business Area. There, we have low cost nuclear and hydro capacity, which means that even in the recent conditions, EBIT margin has been above 40%, which is driving the returns in this business, if we were to account, for the assets at acquisition value as is illustrated here on the right hand side, the ROCE last year would have been 23%. So to summarize, In the next phase, of UPM transformation, we are investing in businesses where the targets and the track record for returns are higher. So here on this slide, on the left hand side, you can see the split of our capital employed, 2019 and the 5 year average returns So on the forest and energy holdings or assets, we have, achieved 6% return on capital employed. And, on the rest, what we can call the sort of industrial assets or industrial operations, the, returns have been significantly higher on the average 17%. And then now, obviously, what we are doing, we are investing in Uruguay, in biochemicals, in, the specialty packaging materials eventually biofuels. There, the return target is 14%, I think we have given you some evidence today that we can expect to clearly exceed that target on the investments that we are making in, in that area as is illustrated in the middle of the chart. So we can expect, sort of a steady steady return on our, assets in forests and energy and growth in the higher returning, industrial operations in the spearheads, which will drive, the group level, returns up during the coming years. I will close with this slide, which you again saw as part of, UC's presentation. We continue the transformation. We are growing through, investments, in the spearhead businesses, the spearheads of, specialty packaging materials, but Biofuels, Biochemicals, they will bring us growth in high margin, higher, return business, which will also drive the UPM bottom line and the UPM value up during the coming years. Thank you. Hello. Now we are ready for our final Q and A session of the day. We we will cover questions, regarding UPM strategy, sustainability performance and then UPM communication papers. So we have here UC Peson and Karistolberry tapia Korpen, and we have Winfried shower, on the line. So, you'll see, first of all, we have received several questions about, return hurdles, return criteria. What are we looking for? It's it's more of a kind of portfolio question. What what are we looking for when we are allocating capital. So that was in my presentation, but also Tapio was referring to that, that, you know, we, we definitely want to, transfer UPM to the future. In our minds is, of course, high returns. But also new position for the whole company with, with the products that are having high entry barrier long term fundamentals for demand, sustainability being in the focus as well, and responsibility. So therefore, it's a it's a kind of where where we we think about the new future and and find, product areas, portfolio pieces that are really improving the performance of the company. Obviously, in Tapio's presentation, he was presenting the hurdles of each business more capital intensive businesses are having a somewhat lower kind of, return on capital employed target, whereas like Raflatac is, having 20 percent return on capital employed. Each business is having a, its own kind of, path and road map to to grow, and our ambition is to grow, with high profits. Tapio, UPM's operating cash flow, was somewhat lower in the first half, What what what how do you think of that, in the context of, dividends? Yes. I think the, kind of when thinking about the dividends, obviously, what is important is, actually this sort of, 5 year view, the bigger picture that I was, talking about in, in my part. Obviously, we have the dividend policy, 30 to 40%, of operating cash flow. But, in a sense, the meaning of that dividend policy is that it gives us the fairway where we want to sort of land over the time in any given year, you know, we can be a little bit in the rough on the left or the, or the right hand side, but as long as the sort of big picture is intact, then, that is more kind of the, perspective, which I think we, in the management and surely the board will consider when it comes time to to think about the dividend decision. Bean Fried, we have received, several questions regarding the paper market. How do you see it that now that there was such a sharp impact from the lockdowns, during this, this, year and and the summer and and the springtime do you foresee some kind of rebound, in, in next year, kind of positive demand development, or how does it So, 1st of all, I believe we have to assume that we will have a kind of one time permanent adaptation based on this, strong lock down and and short disruptions. So in this respect, of course, some developments took place more in the direction of digitalization, which most probably will not come back. But afterwards, we expect a certain recovery, of course. And then the big question is, of course, how does our trend line development, continues. So it's the first, investigations or studies from the market are tending more to to the direction of what we have seen in the recent years. There is also kind of, another question. How do you see the the paper price level, are we grow close to the cash cost level of marginal producers? So if we look for the, European price levels, then we are currently, I would say on the way back roughly where we are coming from in 2017. And they, of course, have been around in in around this corner. Let's take a totally different kind of question, Kari. Do you see a forest land carbon carbon sequestration developing into a market, that creates profits for UPM? And when might that be? Yes. Maybe. First, that we are actually selling that service already. So we are getting revenue from Caboz carbon sequestration activities already today, but that is a small scale activity today. When we look at the world, I think the story is, rather, that the there is a kind of big opportunity in terms of kind of gigaton scale, carbon sequestration, activity in the world at a low cost that being kind of a low double sit, US dollars per ton of CO2. At the same time, everybody consumers us is paying, for carbon abatement, I. E. He mentioned reduction triple digit US dollars per ton. So there is this opportunity to have the same impact in the world with much, much lower cost. So that, I think, creates a kind of a business opportunity for companies like UPM who actually do that activity already, today for kind of raw material. Sourcing and generation purposes. The often we hit kind of ideological or political barriers when thinking about that. So kind of, it it's not, let's say 2 days' world, activity in a big scale, but, I think it's evident that that will that will come. Do you do you think that, one needs to own more forest due to that UPM has been increasing our footprint in in Uruguay and and rather on the decreasing side on in Finland. Yes. Obviously, owning land that you can build, say, plantations, for example, own that helps in in that activity. Yes. And that's what we have been doing also in in bigger scale in Uruguay where we already own, in the scale of 400,000 hectares of of land today. Yeah. There's a very kind of fundamental question. What is sustainable for history? That is, that is a good question, Mika. So and and there's no kind of exact definition for that, but the But, if we think about sustainable forestry, it has to be environmental and environmentally sustainable economically sustainable, like, kind of commercial activity, but then also socially sustainable. And, I think in practice, many of those aspects are taken care of with today's, forestry certifications gems, and, that's also what we have been doing. All of our forest directed is, certified much of that even with several. Certification schemes. You say there is a question here that, that, seems that, we have quite different kinds of businesses. So is that okay? And could you consider spinning something off? Yes. UPM is having 6 different businesses, and the and the business logic is quite different. If you compare plywood to plant pulp business. But, on the other hand, we do have a lot of corporate synergies and of course, the forest biomass is, is one kind of a key denominator for our businesses. And then it is all about the question that are we able to be a efficient operator. Are we able to be one of the best operators in the global global markets? And, And I have to I have to say that, you know, when I'm I'm reviewing all of these businesses, they all are, on the top of the of the of the ranking list of, you know, being efficient operator generating excellent products, high efficiencies, efficiently using raw materials, and then, then ultimately making good profits. So, basically, this UPM operating model is actually hosting these, all these businesses very well. Tapio, we have discussed quite many different new new products and, businesses, any any kind of, way to illustrate to people what the financial impact might be once these are up and running. Well, I think I had some illustrations in the in the my part of the presentation, you see, showed them as well. So again, in the areas where we are investing, the margins, are higher, and, and again, you can see it from, from the evidence already today from the ongoing businesses like the pulp business obviously gives us an indication of, the potential in Uruguay combined with the $280 per ton for the for the new mail, or let's say we gave you an indication today of, what the financial track record has been for our, biofuel plant in La Penranta. So, higher margin, higher return businesses. And, if they, let's say, deliver 2,000,000,000 plus like you'll see what's sort of roughly indicating in terms of, annual sales that obviously will, then, impact the sort of, you know, group level profitability quite clearly already. Right. It's manic meaningful impact and, during, let's say, relatively short period of time 5 years or so could be reality. Yes. Winfried, quite many people have been asking about the market balance in, in the paper business in Europe And of course, we we have announced plans how to how to adjust our operations, but, how do you see, the kind of, balance in the market, is is there how big is the need for further actions, to have a balanced market? Anything you can kind of say on on that? So, of course, we don't give any guidance and also no speculations on what you are thinking about it in this respect, but but just also to refer us to the public announcement, which have been already on like like SCA, for example. And, of course, this also popped in and, let's say also with are combined with our plant actions currently, just taking that as an example, already LWC will get into a corridor, which which will be quite close to balanced, for example. Let's see how, how it will continue. Tapio, there's a question that they do you see it? Is it acceptable to exceed our leverage target, temporarily? Well, first of all, I think we can quite comfortably manage in a sense with the plans that we have talked to talked about today within that sort of, leverage target or or or policy that we have in place. I think, of course, that is not either, in a sense, a hard ceiling, let's say, in a situation, would we face a a kind of a once in a lifetime acquisition opportunity. But again, with the view that we would quite quickly return back to to to the sort of levels below our our policy of two times. You'll see any any any thoughts about, now now we are, of course, in the middle of a a big project in in Uruguay, is there potential beyond that, Posadero stores or within that kind of expanding further I think that, you know, UPM has has made that kind of proof for everybody in the last almost 15 years that, There's always a plan. When when we started up our biofuels plan, we already were thinking about the scaling that business up and when that was actually moving ahead, you know, we were already quite far away with the biochemicals. And the and just after one year that we bought Uruguay or we, you know, split the Botnia, we were already thinking about the next step. So basically, yes, I think that, that's a kind of, that's in our kind of change now in in our kind of behaviors that we we think about the next steps as well. But, of course, we focus on on on current now very, very clearly, but, but all things needs time for development. Like, Van Aikens was saying earlier that, you know, what's the entry barrier in in, in pulp business, it is $2.80. $2.80 per ton. And, and that's required and and we needed 10 years to develop that 280. And when the 280 was, firmed and firm, view of of that, you know, we made a decision. So, yes, we we need to think about the future, and that's the nature of UPM. Right. I think we are starting to be at the end of our event. So so I would like to thank everybody, but that has participated in our, our event, and thank you for your interest You'll see what you have. Any final words? Yes. First of all, thank you for coming. Thank you for being with us these 3 hours. It it is our our great honor to host, host this, this event and for me as well. We are in we we have 3 things in our mind. It is run, run efficiently, make the company making the performance cash flow as Tapio's explained, explaining very diligent, you know, kind of operations, run well, run fast, run run efficiently and make profits. Then build. This build is, obviously, one of the key cornerstones of the company. Now we are having $3,000,000,000 investment portfolio to actually then, generate new cash flow, new new profit a new return. So over on investment, so built. And then then finally, it is to develop. And the and one great example is our our, renewable fuel business development, which I think that Hopefully, in the near future, we will we will move into the more, basic engineering phase on on that. So run, build, develop. Thank you for being with us. Thank you.

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