UPM Annual Report 2019

OUR DIRECTION • Profitable organic growth, potentially complemented by acquisitions • Expanding customer reach through commercial excellence • Widening product portfolio, especially in high value- added and sustainable products and solutions • Innovating in productivity OUR STRENGTHS • End-use-focused product offering • Sustainability and product safety leadership • Global delivery network and efficient supply chain • Global scale in R&D and technical expertise • Modern, strategically located production assets

UPM Raflatac

LEADING IN SUSTAINABLE LABELLING

UPM Raflatac’s strategic cornerstones for growth are improved customer reach, a wider product portfolio and winning operations. Sustainability with a 360◦ lifecycle approach is integrated into our strategy.

KEY FIGURES

2019

2018

1,555

Sales, EURm

1,488

126 579 21.8

Comparable EBIT, EURm

126 535 23.6

virginmaterials with renewable ones — one tonne of fossil rawmaterial can now be replaced with one tonne of renewable raw material (readmore below). Another example of the collaboration is the UPMRaflatac Fossil-Free Adhesive made from the same renewable material. UPMRaflatac RAFNXT+ range was the world’s first label material verified by the Carbon Trust. Compared to UPMRaflatac’s standard range, this paper label material helps companies to reduce their carbon footprint andmitigate climate change. Our newwash-off labelling solutions responded to the growing demand to increase the reuse of glass and plastic bottles. We introduced new label materials with recycled content to contribute to a circular economy. We also expanded our product offering to support pharmaceutical companies in ensuring patient safety through secure and tamper-evident packaging. Value from responsible operations UPM’s Biofore Site™ programme aims to enhance the culture of responsibility in our factories and terminals. It provides a platform for continuous improvement towards meeting UPM’s 2030 responsibility targets. Reducing CO 2 emissions and water consumption and aiming for zero solid waste to landfill are common targets for all our

production sites. We increased the use of renewable electricity at the UPMMills River factory in the US. The factory is now our fourth factory powered by 100% renewable energy, which is a major step towards meeting our target. Five of our factories are now certified in accordance with ISO 22000 food safety standard. In 2019, we responded to the market demand by launching a range of FSC™- certified paper face stocks for the Americas market. This supports our aim to supply products that are sustainable over their lifecycle. We continued to expand our RafCycle® by UPMRaflatac service for turning waste into a resource. RafCycle now has 150 partners globally in 16 countries. Towards a truly circular economy UPMRaflatac is leading in sustainable labelling by partnering with key influencers in the forest and packaging value chain. We have signed the New Plastics Economy Global Commitment and CE 100 initiative led by the EllenMacArthur Foundation. Our target is to promote a circular economy and to reduce unnecessary plastic packaging by innovating future-proof circular materials. The first Global Commitment progress report, which UPMRaflatac is part of as the only label material supplier, was published in October.

We are one of the leading suppliers of self- adhesive label materials operating in 40 countries and serving customers in over 120 countries. Our high-quality film and paper label materials for consumer product and industrial labelling are designed to combine economy, sustainability and optimised performance. In 2019, we continued to improve our customer reach through commercial excellence development including the launch of our online customer portal MyRAFLATAC. We also opened a new service terminal in Chelyabinsk, Russia. We started a three-year productivity programme at our factories. More sustainable and innovative choices In 2019, we continued to respond to the growing need of more sustainable packaging solutions. This means utilising rawmaterials that are of sustainable origin or recycled and offering products that are resource- optimised. The solutions also enable packaging recyclability and reducing waste throughout the packaging lifecycle. UPM Raflatac Forest Film™ is the industry’s first wood-based filmmaterial innovated in collaboration with UPMBiofuels using UPMBioVerno naphtha, a residue of pulp production. This innovative material answers brand owners’ needs to replace fossil-based

Capital employed (average), EURm

Comparable ROCE, % Personnel on 31 Dec.

3,181

3,244

Comparable EBIT remained unchanged. Higher sales prices and delivery volumes offset the negative impact of higher costs and unfavourable changes in currencies. Global demand growth for self-adhesive label materials continued, albeit at a slower pace.

CASE

UPM Raflatac Forest Film is a transparent labelling material originating from sustainably managed forests.

FINNISH WATER SOLD WITH PURITY Founded in 2017, the Finnish company Vellamo sells premium natural mineral water in North America and Finland. The water bottles look like blocks of ice, reflecting the blue colour of a glacier. The high-quality, sustainable label is an integral part of the Vellamo water brand. The company recently started using the new UPM Raflatac Forest Film ™ – a transparent labelling material originating from sustainably managed forests. “The labels must be sustainable and meet all legal requirements. We also strive to recycle materials efficiently and manufacture the product itself rationally. Our goal is to achieve a carbon-neutrality for our materials, production and logistics. We are committed to avoid selling to areas without a recycling system,” says Petteri Ahonen, CEO of Vellamo.

Demand for renewable packaging materials for consumer products is increasing rapidly. Forest Film is the first wood-based polypropylene labelling material on the market and has the same properties as traditional plastic labels. The raw material used for the label material is renewable UPM BioVerno naphtha produced at UPM’s Lappeenranta Biorefinery. Renewable naphtha is a fossil-free raw material made from crude tall oil, a residue from pulp production. Vellamo’s company values and goals are similar to UPM Raflatac’s. “Nature and its values are strongly represented in the Vellamo water bottle. Our use of completely recyclable packaging materials is a good example of combining smart solutions with great storytelling and design,” Ahonen continues.

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OUR BUSINESSES

OUR BUSINESSES

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

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