UPM Annual Report 2019

Innovation

CONSISTENT STEPS IN DEVELOPING NEW BUSINESSES SINCE 2005

NEW SUSTAINABLE ALTERNATIVES

• Exploring the use of wood plastic composites in the building industry • Strong increase of second-generation biodiesel development • Developing products and processes based on new technologies • Production of UPM ProFi, composite material, begins in Lahti, Finland • Testing of biomass gasification technology at pilot scale in the USA • New UPM Biorefinery Development Centre established in Lappeenranta, Finland • Production of UPM ProFi expanded to Bruchsal, Germany • Finnish Centre for Nanocellulosic Technologies established • Developing new bioethanol and energy production concept using waste • Pilot testing of gasification technology in the USA completed • Research on replacing fossil-based chemicals with biochemicals in UPM products • Biofuel production technology development and nanocellulose research • Developing new concept for the production of biomass-based bio oil for power generation • EIA for a biorefinery in Kuusankoski and Rauma, Finland and at Stracel, France • EIA for a biorefinery begins in Lappeenranta, Finland • Product development of UPM Formi, a new biocompiste material, begins • EIA for a biorefinery in Lappeenranta concluded • Market launch of UPM Formi • Pre-commercial production of cellulose nanofibrils starts at Otaniemi, Finland • Research of various biofuels production processes and raw materials • Development of pilot- and plant-scale industrial applications for biofibrils • Comprehensive UPM BioVerno fleet tests begin • UPM ProFi decking product portfolio expands • UPM Biochemicals business unit established • Developing and testing industrial biochemical applications • Joint research projects with partners • Sales agreement for the distribution of UPM BioVerno diesel • UPM’s Biofore Concept Car premieres at the Geneva International Motor Show • UPM BioPiva lignin material launched • Developing technology to produce advanced biomass-based fuels with partners • GrowDex ® , a nanocellulose hydrogel for 3D cell culturing launched • Innovation unit at the Biomedicum research centre in Helsinki established • Side stream efficiency research intensifies • Testing Brassica carinata sequential cropping concept in Uruguay • New WISA BioBond lignin-based gluing technology introduced • Basic engineering study on a potential industrial-scale biochemicals biorefinery in Germany starts • UPM Lappeenranta Biorefinery at its design capacity • UPM Sustainable Fibre Materials research project begins • UPM Biomedicals unit established • EIA for possible Kotka Biorefinery, Finland • Entering the bioplastics market with UPM BioVerno renewable naphtha • New biocomposite material for 3D printing launched • Testing of industrial biochemicals applications • GrowDex-T hydrogel with advanced features launched • World’s first wood-based polypropylene labelling material Forest Film launched • New UPM ProFi products launched • Collaborative project to bring 40 million wood-based beverage cartons into supermarkets launched in Finland • Wood-based renewable functional filler concept for rubbers introduced • FibDex ® , a nanofibrillar cellulose wound dressing launched • Decision to enter to wood-based biochemicals business by building a biorefinery in Leuna, Germany. • Piloting biofuels and biochemicals in Lappeenranta • Construction of UPM Lappeenranta Biorefinery begins • Production of UPM Formi begins in Lahti, Finland • Increased focus on efficient use and reuse of side streams • Production begins at the UPM Lappeenranta Biorefinery • Industrial concept development proceeds in biochemicals

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We develop new businesses, products and technologies with a focus on bioeconomy. We are continuing our development of biomolecular businesses and we launched new products over the course of 2019.

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UPM’s renewable naphtha can be used either as a low-emission biocomponent for gasoline or as feedstock for replacing fossil rawmaterials in plastics and other chemical industry solutions. In 2019, we launched a collaborative venture with Dow and Elopak to create a 100%wood-based, fully recyclable beverage carton. UPMRaflatac and UPMBiofuels collaborated and

advanced fuels for use in road transportation, aviation and petrochemicals. Research on rawmaterials is focused onmaking efficient use of different forest industry residues and by-products. Alternatives made fromwaste and residue- based rawmaterials that do not compete with food production are being tested. UPMBiofuels is developing a new feedstock concept by cultivating Brassica carinata as a sequential crop in Uruguay. The carinata crop produces non-edible oil that is suitable for use as feedstock for biofuels and its by-product can also be used as protein for animal feed. UPMBiochemicals offers and develops innovative, sustainable and competitive wood-based biochemicals. The product segments are glycols and lignin products. Strong growth is expected for the market in the coming years as biochemicals mainly replace chemicals made from fossil raw materials. UPMBiochemicals has been Biochemicals offer renewable alternatives

launched UPMRaflatac Forest Film™, the first wood-based polypropylene film label material on the market. We are now exploring opportunities to scale up the business by studying a potential larger biorefinery in Kotka, Finland, with a wider range of sustainable feedstocks. The potential biorefinery would produce approximately 500,000 tonnes of unique,

Developing biofuels and naphtha UPMBiofuels successfully entered into the market with its UPMBioVerno renewable diesel and naphtha. UPMBioVerno drop- in diesel is a unique, competitive and sustainable alternative to fossil fuels and first-generation biofuels and is produced from crude tall oil, a residue of pulp production.

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CASE

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NATURAL WOUND CARE New wound care dressing made from a sustainable, wood-based raw material can speed-up healing and brings new convenience to patient care. FibDex ® is the third biomedical product based on wood-based raw materials to be commercialised by UPM. The dressing, made from nanofibrillar cellulose, provides a moist environment for optimal healing and absorbs fluids from the wound. FibDex is particularly suited to treating large wound areas. Just one dressing is required throughout the whole treatment. Based on the clinical trial results, FibDex was awarded the CE mark, as it fulfils the standards and legislative requirements set for medical devices.

As UPM’s biomedical products are newcomers to the biomedical and clinical applications markets, it will take a lot of work to increase recognition of both the company and its products. UPM is currently looking for partners to distribute the products. UPM is aiming for global markets. In addition to Europe, the product can be sold in in countries outside of the European Union which accept the European CE mark. UPM has created the wound care product in collaboration with researchers from the University of Helsinki and surgeons and nursing staff from the Helsinki Burn Centre.

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OUR BUSINESSES

OUR BUSINESSES

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS