UPM Kymmene - AGM 30 March 2021
We note that as a result of the Covid-19 pandemic the AGM will be held as an electronic meeting only. Consequently, it will not be possible to attend the AGM in person.
Under ITEM 8 the board of directors proposes to distribute a dividend of EUR 1.30 per share. The (proposed) dividend is NOT covered by EPS as well as FCF (due mainly to substantial capital expenditures and deteriorated company performance). Alternatively, we also note that UPM has a strong balance sheet (solvency of 63%), a very limited amount of net debt (net debt to EBITDA ratio stood of 0.04x as of financial year-end), and that dividends distributed for (at least) the past 5 years were (amply) covered by EPS and/or FCF. Although we are currently willing to tolerate a dividend in excess of EPS and FCF as it currently does not jeopardize the Company’s financial position, we will continue to monitor the situation with utmost interest and reserve the right to oppose to this resolution next year if the Company’s (financial) results have not been significantly improved and/or the board of directors refuses to cut the dividend. Accordingly, we recommend to vote FOR.
Under ITEM 10 approval of the Company's first remuneration report is sought. We have various disclosure related concerns with regard to the Company’s remuneration report. The remuneration of the other members of the executive management is not disclosed at all and no ex-post explanation of the STI as well as LTI has been provided. The level of vesting of the LTI is not disclosed either and to the best of our knowledge the LTI is not capped. The pay-for-performance connection cannot be reasonably assessed. We furthermore consider the CEO’s total compensation to be (significantly) above Finnish as well as industry peer group market practice. Accordingly, we recommend to vote OPPOSE.
Under ITEM 11 approval of the remuneration of the board of directors is sought. Although the (proposed) increases are not manifestly unreasonable, we deem the current non-executive fees to be already at the upper level of Finnish market practice for a company with the size and complexity of UPM. Therefore, we do not approve of any increases without adequate justification. Since we do NOT consider the motivation provided to be sufficient, we recommend to vote OPPOSE.
Finally, under ITEM 15, it is proposed to re-elect PricewaterhouseCoopers as the Company's external auditor. In view of the current term in office of the external auditor, we recommend to vote OPPOSE.
UPM-Kymmene is a global paper and forest products group, mainly engaged in the production of paper, with an emphasis on the manufacture and sale of printing and writing papers. Co.'s operations comprise of these segments: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper ENA, UPM Plywood and Other. UPM Biocomposites, UPM Biochemicals business units and Group services are reported in Other operations. Co.'s activities are centred in European Union countries, North and South America and Asia with production plants in 13 countries.
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