Committed to responsibility · Over the course of the autumn, Plywood hired 50 new employees to increase production. The objective is to ramp up production capacity by 15%. Sawn Timber

1 CORPORATE RESPONSIBILITY REPORT 2015

Corporate responsibility report 2015

Committed to responsibility


COMMITTED TO WOOD

Table of contents

Foreword 3

Group key figures 4

Tax footprint 5

Managing Director’s review 6

Committed family company 8

Locations and sales network 9

Meaningful work 10

Fair partnerships 12

Healthy environment 14


COMMITTED TO WOOD

What is the everyday life of a hundred year old family company like? What do we mean when we say we are committed to wood and a responsible and long-term partner for our customers and stakeholders?

The aim of this report is to provide you, the reader, with an overview on the most important events in Koskisen’s year 2015 with figures, images and a few stories. Our report is a snapshot-type publication, which hopefully piques your interest to learn more about us.

You will find more detailed and in-depth information:• our online magazine www.worldofwood.koskisen.com• our website www.koskisen.com • our responsible operations portal www.commitment.koskisen.fi

“Committed to wood” is our widely used slogan and describes our attitude and long-term thinking in all operations.

Eva WathénDirector CSR & Brand

We take care of our business, personnel and the

environment responsibly and in the long term.

Our operations are based on the comprehensive

processing of wood to bring value to our customers.

Our customers’ needs steer our profitable renewal.

Foreword

Koskisen’s strategy 2020


Group key figures 2013–2015

Figures MEUR 2013 2014 2015

Turnover 220,0 240,8 247,3

Turnover per person (EUR 1,000) 239 241 234

Change in turnover (%) 9,5 9,5 2,7

Export share % in turnover 53,3 55,0 55,0

Profit 5,8 10,2 7,9

Profit/loss before extraordinary items, reserves and taxes

-0,2 3,8 3,7

Net financial expenses, % of turnover 2,7 2,6 1,7

Loans form financial institutions, % of turnover

45,7 39,5 34,7

Depreciation according to plan 9,3 8,5 8,4

Investments 5,0 5,0 5,0

Balance sheet total 159,8 156,9 148,9

Return on investment (%) 3,6 6,9 6,0

Average number of personnel 922 998 1057

Finland 840 880 936

International subsidiaries 82 118 121


Tax footprint 2015

GROSS TAXES TOTAL

26,3M€

FISCAL CHARGES AND FEES RELATED TO THE PERSONNEL(social contributions, unemployment security, pension, accident insurance and group life insurance payments)

8,7MEUR

WITHHOLDING TAXES FROM SALARIES

16,3MEUR

DIRECT TAXES

0,84MEUR

OTHER TAXES(vehicle, electricity, fuel, purchased heat, property and capital transfer tax)

0,69M€

VALUE-ADDED TAXES, GROSS-ACCOUNTED

-13,4M€

SUBSIDIES(e.g. training compensation for apprenticeship training)

-0,27M€

NET TAXESTOTAL

12,9M€


Managing Director’s review

For Koskisen Group, 2015 was largely similar to the previous year. The Group’s net sales totalled EUR 247 million, up 2.7% from 2014. The operating profit amounted to EUR 7.9 million, which is weaker than in the previous year.

Plywood and Sawn Timber production made up 66% of the Group’s net sales. Total net sales of the parent company Koskitukki’s wood procurement was EUR 109 million, including intra-group sales. Exports accounted for 55% of the Group’s net sales and our products were delivered to 64 countries.

Overall, 2015 was a very mixed year: Plywood performed well, while the other business units saw their operations affected by weak domestic demand and a decline in the market prices of sawn softwood. However, the Finnish market price of softwood logs failed to flex correspondingly downward.

At the end of the year, the Group had 1,057 employees, of which 120 worked abroad. The Group’s employee satisfaction survey 2015 showed positive results: on a scale of 1–5, we received a score of 3.7, an improvement on the previous year.

Occupational safety was one of the main focus areas at Koskisen Group in 2015. The entire personnel and subcontractors were coached in an effort to improve their ability to make safety observations and develop safety issues. In 2015, the Incident density (serious incidents / million working hours) was 20.6, which leaves plenty of room for improvement.

Of the EUR 5 million invested during 2015, most was used for replacement and upgrade investments in the plywood mill and the sawmill. In addition, a number of system projects were launched.

Customers and personnel at the heart of strategy 2020

In 2015, we defined Koskisen Group’s strategy 2020, which places a strong focus on both personnel and customer programmes in the next few years. We will continue to evolve as a versatile wood products expert, with the customer-oriented development of our products and services and value creation in all of our activities being top priorities in our renewal. Taking care of the well-being of employees and the environment in furthering business goals is at the heart of sustainable business operations.


Performance per unit 2015

lywood operations benefited from rising prices and improved productivity in the use of raw material. Over the course of the autumn, Plywood hired 50 new employees to increase production. The objective is to ramp up production capacity by 15%.

Sawn Timber industry was burdened in particular by the decrease in global market prices and a decline in competitiveness, above all, with regard to Swedish and Russian competitors. Demand for spruce timber seemed to recover somewhat in the latter part of the year, with deliveries to China and Japan in particular being on the rise.

Domestic demand for chipboard continued to be weak and the low price level of imported board dumped market prices. The press problems that impeded production were resolved towards the end of the year.

Koskisen Houses continued to suffer from a historically low level of private house building starts (less than 5,000 houses 2015) in Finland. In the autumn, the Housing industry was forced to take the decision to reduce its personnel by 15 people. The new strategy, which is strongly focussed on professional building products, took shape over the course of the autumn. The factory’s capacity utilisation rate was high.

In Birch Products, demand for veneer and thin veneer plywood was steady, but the markets were fragmented and price competition was fierce. Demand for birch sawn timber varied according to product, and the best grades sold well.

Wood procurement succeeded fairly well and the sluggish supply of the autumn improved with the arrival of winter. Energy wood net sales fell short of the targets mainly due to the mild winter in Finland.

Koskisen’s year 2015 turned out to be satisfactory. Although we fell slightly short of our targets, we were able to avoid the worst-case scenarios by enhancing our operations. General expectations of growth in domestic demand or the recovery of the global economy are not high. Koskisen is nevertheless capable of developing and growing its sales through a customer-oriented approach, high quality products and successfully targeted investments in accordance with its strategy.

Markku KoskinenManaging Director

TOTAL TURNOVER MEUR

247

Plywood Industry 33 %

Sawn Timber Industry 33 %

Wood procurement and bioenergy 16 %

Chipboard Industry 10 %

Housing Industry 5 %

Birch Products Industry 3 %


Committed family company

Every year, Talouselämä 500 magazine lists the 500 largest Finnish companies based on turnover. In 2014, Koskisen Group was the 239th largest.

We are an active member of the Finnish Family Firms Association. According to the comparative study conducted by the association in 2012, we are clearly a part of the backbone of the Finnish economy.

In Finland, family businesses account for: • 80% of Finnish companies• 75% of employees in SMEs• 50% of the workforce in private sector• 40% of turnover of all companies• 40% of medium-sized and large companies• 25% of listed companies• 20% of TOP 500 companies

Our ranking requires responsible and long-term operations from us while encouraging us to operate increasingly well. In 2014, we commenced deliberate work to develop responsible business and to increasingly highlight it in our communications. In 2015, we implemented ISO 26 000 standard as our social responsibility framework as well as our own social responsibility communications portal www.commitment.koskisen.fi provided by Versoglobe Oy. In addition, we have encapsulated our ethical policies in our operating guidelines and have become active on various levels towards our stakeholders and partners.

Towards the end of 2015, we commenced cooperation with Natural Step Oy to calculate the carbon footprint of the Group. With them we also further clarified our circular economy description.

Group’s 100th anniversary

1909 1935 1966 1974 2009

Kalle Koskinen starts sawmill

operations

Järvelä sawmill is built

Plywood mill is founded

Chipboard mill is founded

First sales representative in Germany

1985 1996

Koskisen acquires Vilkon Oy and Herrala Talot

The major milestones in the history of Koskisen


Melilla (Spain)Melilla (Spain)

KielKiel

Järvelä, Finland

Locations and sales network 2015

Vierumäki, Finland

Hirvensalmi, Finland

Sheksna, Russia

Toporow, Poland

Sales representatives AgentsProduction facilities

Germany, Gronaus

Benelux, Landsmeer

Estonia, Tallinn

UK, London

Spain, Madrid

China, Shanghai

Poland, Toporow

Sweden, Gothenburg

France, Paris

France, Rozay en Brie

Northern Ireland, Belfast

Greece, Attiki

Israel and Turkey, Helsinki

Portugal, Maria Avioso

Italy, Lissone

Czech Republic and Slovakia, Brno

Middle East and Africa


We are an important local employer in our mill locations. We employ directly over 1,000 individuals and another 1,000 as partners; taking all indirect effects into account, we provide

employment for almost 5,000 people.

We provide all our employees with meaningful work. We aim to promote well-being at work with a variety of means and as a member of the FIBS Corporate Responsibility Network, we have signed the Diversity Charter Finland. More information is available at www.fibsry.fi.

In accordance with our equality and non-discrimination plan as well as our ethical guidelines, we want to offer work and a livelihood to

motivated experts regardless of their background or gender. We appreciate diversity and want to develop ourselves in understanding difference, which has been chosen as the special theme for 2016.

1000 employees

1000 partners

3000indirectly

Meaningful work


GENDER DISTRIBUTION OF PERSONNEL

1057TOTAL

PERSONNEL

Long career at sawmillEino Heikkinen, who had worked at Koskisen sawmill for nearly half a century, retired on 1 April 2016.

In 1968, after completing his school education, Eino walked over to the mill manager Aake Poikala to ask for work and the rest, as they say, is history.

“I spent the first summer stamping boards for 1.60 Finnish marks per hour. I received my first wages before midsummer and it was 120 Finnish marks,” Eino reminisces.

Over the decades, Eino worked at almost all the workstations at the sawmill - work rotation at its best. His career spanned many changes and investments, as well as the construction of a new sawmill.

“It has been good here. I have noticed that many people who have left have ended up coming back here,” says Eino.

The fire at the old mill was one of the most memorable events, as it must have been for everyone working there at the time. Eino’s moped was also damaged in the fire, but he says he managed to drive it home on bare rims. There has been a great deal humour among workmates which has helped him to cope well in the midst of the hard work.

With Eino, a piece of the sawmill’s history will leave the sawmill, since he was the last employee who had worked at the “old mill”. Eino is not worried about how he will spend his retirement days. “There is plenty to do at home and I can sit on the porch listening to whether the mill is in operation today,” says the seemingly satisfied pensioner.

Physical work has kept him in slim and in good shape. Over the years, Eino has sawed many different kinds of wood, such as aspen, alder, pine and spruce. Eino still thinks pine smells good.

MEN 75 % WOMEN 25 %

PERSONNEL SATISFACTION(ON SCALE 1 TO 5)

ABSENCE DUE TO ILLNESS(%)

201520142013

4,1 %3,6 %3,8 %

2013 2014 2015

3,58 3,62 3,70

0

1

2

3

4

5

GOAL

ALLE 3 %

0

1

2

3

4

5

GOAL

3,75


Fair partnerships

We have a wide partner network. We employ a number of different entrepreneurs in our operating locations. A significant part of the customers have been our partners for many years and many have a family business or at least entrepreneur background. Forest owners are vital partners for our raw material provision. Our value chain is significantly based on partnership thinking.

We monitor our customer and partner loyalty using the NPS indicator. The latest sample was collected in conjunction with the 2014 customer satisfaction survey, but we have since also utilised the indicator in numerous other contexts. In 2015, we organised our first ever partnership event, during which we gathered representatives from various parties together to listen to expert presentations and exchange ideas. We are going to repeat this concept towards the end of 2016.

Also our sponsorship cooperation emphasises long-term work and our strong belief in that our work with young people will also provide us with good workers in the future. We also cooperate actively with local educational institutions.

“A company full of nice people: We can call and reach everybody if we need to. Rather a flat and transparent company than a top – down one.”

“Product performance and reliability, company support and responsibility. Always a reliable delivery schedule. Excellent technical support.”

“Koskisen has many strenghts: good people, good products, excellent service and a forward thinking approach to new products.”

What our customers say

Koskisen’s decorative products customer meeting at the Sibelius Hall.


Koskisen and Isku sign a strategic partnership agreementIsku Teollisuus Oy and Koskisen Oy signed a strategic partnership agreement in 2015. Isku will centralise all its furniture board sourcing to Koskisen.

Arto Tiitinen, CEO of Isku: “We are strongly centralising our sourcing and we favour Finnish wood and quality. The cooperation is based on the development of our mutual competitiveness and the fact that the furniture board of our partner is PEFC-certified. We combine our strengths in product development and the fast delivery chain is important to our customers. We invest in exports and that is our growth area.”

Markku Koskinen, Managing Director at Koskisen Oy: “We have an increasing will to create deeper partnership and to support Isku’s investment in increasing exports. Highly refined wood products are especially important to Finland and in the furniture sector we should reach a situation where our exports exceed imports.”

WE MEASURE CUSTOMER LOYALTY USING THE

NPS INDICATOR*

DURATION OF CUSTOMER RELATIONSHIPS

OVER 10 YEARS

6-10 YEARS

37NPS SCORE

PROMOTERS 48 % PASSIVES 42 %

DETRACTORS 10 %

0

12

24

36

48

60

2-5 YEARS

LESS THAN 2 YEARS

*Net Promoter Score – (NPS): “How likely would you recommend company to a friend or colleague?”. Customers respond on a 0-to-10 point rating scale.

Answers are categorized as follows:0–6 = Detractors are unhappy customers who can damage brand and impede growth through negative word-of-mouth.7–8 = Passives are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.9–10 = Promoters are loyal enthusiasts who will keep buying and refer others, fueling growth.

Promoters – Detractors X 100NPS score =

Total


Healthy environment

We are proud to work with a renewable natural resource. When we harvest, we also sow the new and take care of the well-being of the natural environment also for future generations. We comply with the principles of sustainable forestry and utilise our raw materials efficiently at our production facilities and those of our cooperation partners. We want to invest in ecologically sustainable products and see to it that we minimise the factors burdening the environment. With this in mind, we launched a project aiming at the calculation of our carbon footprint towards the end of 2015. In 2015, we implemented a significant improvement in recycling waste when, as a result of over ten years of persistent work, we found a solution together with Ekokem for recycling aluminium-coated plywood board waste.

Circular economy

In the operation of Koskisen’s Group, we circulate both wood and energy as well as production raw materials. The figure below illustrates the circulation related to the production of plywood and chipboard as well as the opportunities afforded by the circular economy.

Materials produced by

society

Glues, chemicals, adhesives

Minerals

Metals, oil-based raw materials

Ecosystem

Forest, natural resources

Factory

Plywood, chipboard

Power plant

Own house factory

Koskisen Group

Customer

External factories and power plants

E.g. furniture manufacurer

Energy recovery

FOREST REGENERATION

CHIPSHEAT,

STEAM

INNER PROD. CIRCULATION

CHIPS

Biochemical

products

Decaying and composting

Back to

biosphere

E.G. OVERLAYS

1 Maintan

2 Reuse, redistribute

3 Refurbish, remanufacture

4 Recycle as components or

material

5 Utilization in another value chain

Circular economy strategies 1-5: New business opportunities


Recycling of aluminium-coated plywood board waste

One of Koskisen’s customer-oriented products is aluminium-coated plywood board for horse carts.

“Sawing and working of plywood creates board waste for which waste management alternatives have been sought for a long time. The aim has been to be able to recycle the aluminium in the boards as a raw material for the metal industry. There is almost 12 m-% of aluminium in board waste,” says Kimmo Järvinen, environmental engineer for Koskisen Oy.

The Waste Act amended in 2012, requires companies to find ways to recycle waste. Studies were carried out in cooperation with various waste management companies starting with the manufacture of aluminium-coated plywood. In addition, theses related to the subject matter were commissioned.

For a long time it seemed that the solution would prove elusive despite all our efforts. However, in 2015 we got lucky. Ekokem Oy found a solution to use the aluminium contained by the plywood disc.

“Aluminium waste is recycled and used as raw material for manufacture of aluminium. This significantly decreases the waste costs incurred by aluminium-coated plywood boards,” says satisfied Järvinen.

TREE SPECIES USED AT KOSKISEN

77%FROM CERTIFIED

FORESTS

SPRUCE 48 % BIRCH 27 %

PINE 23 % ASPEN 2 %

SHARE OF ENERGY WASTE IN OVERALL WASTE

2013 2014 2015

41,7 %

35,4 %37,5 %

0

10

20

30

40

5050 %

GOAL


www.koskisen.com

www.commitment.koskisen.fi

www.worldofwood.koskisen.com

Committed to Wood

For more information on us and our corporate responsibility

Documents

Committed to responsibility · Over the course of the autumn, Plywood hired 50 new employees to increase production. The objective is to ramp up production capacity by 15%. Sawn Timber