At the business area level, UPM targets top relative performance in their respective markets compared with key peers. UPM has also defined long-term EBITDA margin and ROCE targets for each of its business areas. In the case of UPM Paper ENA, these long-term targets are instead defined for cash flow margin and cash flow return on capital employed.
In UPM Energy, where the asset base is valued at fair value, the ROCE target is 6%. In the less capital intensive converting industry, UPM Raflatac, the ROCE target is 18%. Finally, in the process industry businesses UPM Biorefining, UPM Specialty Papers and UPM Plywood, the ROCE target is 10-12%, or cash return in the case of UPM Paper ENA.
With the current business portfolio, achieving the business area targets simultaneously would result in a UPM Group operating profit margin of approximately 10%, and ROCE of approximately 9%.
At the Group level, UPM's financial targets are based on return on equity and gearing. The return on equity target is at least five percentage points above the yield of a 10-year risk-free investment such as the Finnish government's euro-denominated bonds. At the end of 2015, the minimum target for return on equity, as defined above, was 5.9%. For 2015, UPM's return on equity excluding special items was 12.1%.
The company aims to maintain a strong balance sheet. The maximum limit for gearing ratio is 90%. At the end of 2015, gearing ratio was 26%.